The first year of dividend growth since 2018 is likely to help the FTSE 100 yield 4.1 percent in 2021. The total dividend payout for the index is forecast to reach £84.1 billion in 2021, up from £61.8 billion in 2020, a 36 percent rise.
Total payments peaked at £85.2 billion in 2018, and are predicted to come dangerously close to that figure in 2022, at £85.1 billion, as business profitability, cash flows, and confidence begin to recover from the pandemic’s effects.
For the fourth quarter in a row, dividend projections for 2021 have improved, boosted by more bullish forecasts for miners in particular. This is due to increasing industrial metals prices, albeit September’s strong decreases in copper and iron ore, if they continue, might put a damper on this bullish projected momentum.
However, dividend payouts are expected to reach £85.1 billion in 2022 and 2023, respectively. Moreover, dividend coverage is improving. The FTSE 100’s aggregate earnings cover ratio is now expected to be 1.77 in 2021, up from 1.45 times earnings cover in 2020.
Majority of dividend growth comes from just ten firms
Only ten firms are predicted to produce 80% of the dividend increase in 2021. The top two mining companies are Rio Tinto and BHP Billiton, so income-seekers may be concerned about the fall in iron ore prices, which coincided with fears about China’s economic development.
Miners account for five of the six largest expected dividend increases in 2021, but that number drops to just two in 2022, as decreases in key resource companies dampen the FTSE 100’s overall estimate.
Company profits forecast to hit record high
A continued decline in economic activity could put dividend predictions in jeopardy. Analysts now think that (adjusted) net profits in 2022 will surpass not only the pre-pandemic highs of 2018, but also the current all-time high of 2011, when commodities prices were soaring and miners and oil producers combined accounted for 42 percent of the FTSE 100’s profits.
Miners, petroleum, and financials are predicted to account for more than 80% of the expected £128 billion increase in pre-tax revenue in 2021, and each of these three industries is influenced by global economic growth to some extent.
If the economy provides little or no help – or even hinders – then these profit expectations, and by extension, dividend payment estimates, could be jeopardized.
Investors still need to focus on concentration risk
As a result, when it comes to dividends and earnings, investors must analyze concentration risk. Only ten stocks are expected to pay £45.6 billion in dividends in 2021, accounting for 55% of the total. At £61.1 billion, the top 20 are predicted to earn 73 percent of the total index’s payout.
Anyone who believes the UK stock market is undervalued in terms of yield and wants to buy individual stocks, use a passive index tracker, or buy a UK equities income fund should have a firm awareness of and opinion on those 20 names.
Refinitiv data, company accounts, Marketscreener, consensus analyst forecasts
The ten firms forecast to be the biggest dividend payers
Rio Tinto is anticipated to be the FTSE 100’s single highest-paying stock in 2021. Not all investors will be pleased with this, particularly those who believe mining fails to meet their socially responsible investing (SRI) or environmental, social, and governance (ESG) criteria, particularly in light of Rio Tinto’s heinous behavior in Australia when it destroyed sacred aboriginal sites as part of a copper mine expansion. Others, on the other hand, will applaud new CEO Jakob Stausholm’s efforts to improve the company’s governance and cash flow.
It’s also worth noting that, despite their 2020 dividend reduction, Shell and BP remain among the top 10 largest payers. Again, this may make ESG-conscious investors gnash their teeth, especially if they believe both companies are moving too slowly to transition their business mix to more renewable energy sources. Shell and BP must strike a delicate balance between maximizing the value of existing assets, reinvesting for the future (without overpaying in the wild rush for “green” assets), and keeping shareholders happy with cash returns.
The ten firms forecast to have the highest yields in 2021
Investors should scrutinize the list of the highest-yielding companies carefully, as some of them have a history of having to reduce their dividend payments when times are rough.
Evraz is the highest-yielding individual stock at the time of writing, followed by Rio Tinto and then BHP. Investors may be suspicious of forecast yields of more than 10%, considering the dismal track record of companies previously expected to provide such high returns, such as Vodafone, Shell, and others.
Royal Mail, Marks & Spencer, and Centrica were all were members of the FTSE 100. At one point or another, all were expected to earn a yield in excess of 10%, but instead slashed the dividend.
BHP’s expected exit from the FTSE 100 in 2022, when it switches to a Standard rather than a Premium listing and relocates its headquarters to Australia, is another consideration for investors, at least if they’re looking for a return from index-tracking funds.
Refinitiv data, company accounts, Marketscreener, analysts’ consensus estimates
Dividend aristocrats
Rather than being the highest-yielding stock, companies with the best long-term dividend growth record frequently have the best long-term performance. Regular dividend growers can deliver the ideal mix of bigger payouts and a higher stock price, as the increased distribution will drive the stock price higher by sheer force over time. A 1p per share dividend on a 100p stock may not pique your interest, but if it rises to 10p in a decade, it almost surely will.
The effects of the pandemic and the recession have taken a toll on the FTSE 100 companies that have a ten-year dividend increase track record. This list had 24 companies on it a year ago. Even though National Grid and United Utilities joined this select grouping in 2021, the number has decreased to 15.
Hikma Pharmaceuticals currently has a nine-year dividend increase run under its belt, and will be trying to add a tenth in calendar 2022.
Even taking into account the possibility of adjustments and deletions to the list of dividend-growers throughout time, those that managed to keep their impressive streaks going in 2020 were excellent long-term investments.
The average capital gain and total return from the 15 ten-year dividend growers is 681 percent and 863 percent, respectively. Both easily outperformed the FTSE 100, with returns of 31% and 92 percent, respectively.
Refinitiv data and company accounts were used as sources. *CAGR stands for compound annual growth rate. ** Marketscreener’s consensus analyst projections were used as a source.
Dividend increase is so powerful because it almost always causes a stock’s price to rise.
In 2021, the average dividend yield for the 15 ten-year raisers is expected to be 2.4 percent, lower below the FTSE 100’s average of 4.1 percent. However, their below-average yields haven’t stopped them from generating great overall returns over the last 10 years.
That’s at least partly because the dividend yield on the September 2011 share price using forecast 2021 dividends is 9.9% – and if you offered an investor a guaranteed 9.9% dividend yield, they’d take your hand in theirs, so it’s easy to see how a rising dividend can boost a share price, boosting income and capital gains for a powerful total return.
Data from Refinitiv, business financials, Marketscreener, and consensus analyst forecasts
We publish our ‘Dividend dashboard’ every quarter, which forecasts dividend payouts for FTSE 100 businesses.
These articles are provided for educational reasons only and do not constitute personal advice or recommendations. Forecasts aren’t always accurate indicators of future performance. Past performance is no guarantee of future results, and certain investments must be kept for a long time.
What is the current dividend yield on the FTSE 100?
Since the year 2000, the FTSE yield chart has shown the dividend yield on the FTSE 100 index. The index yield is a weighted average of the total dividends declared by the index’s one hundred constituent companies during the previous 12 months. The FTSE 100 index currently has a dividend yield of 3.53 percent. The current firms in the index, as well as the dividends used to calculate the current yield, are listed on the FTSE 100 yield table page.
Does Vanguard FTSE 100 pay dividends?
The next Vanguard FTSE 100 UCITS ETF dividend is projected to be paid in 27 days after it goes ex. The dividend cover is roughly 1.0, and there are normally four dividends per year (excluding specials).
What is the highest FTSE 100 ever?
Keep track of the numbers. The index was launched on January 3, 1984, with a base level of 1000. On May 22, 2018, the highest closing value of 7,877.45 was recorded. On May 22, 2018, the greatest intra-day value of 7,903.50 was reached.
What is a bad dividend yield?
The safety of a dividend is the most important factor to consider when purchasing a dividend investment. Dividend yields of more than 4% should be carefully studied, and yields of more than 10% are extremely dangerous. A high dividend yield, among other things, can signal that the payout is unsustainable or that investors are selling the shares, lowering the share price and boosting the dividend yield.
Do Tesla pay dividends?
Tesla’s common stock has never paid a dividend. We want to keep all future earnings to fund future expansion, so no cash dividends are expected in the near future.
Can I live off of dividends?
The most important thing to most investors is a secure retirement. Many people’s assets are put into accounts that are only for that reason. Living off your money once you retire, on the other hand, might be just as difficult as investing for a decent retirement.
The majority of withdrawal strategies require a combination of bond interest income and stock sales to satisfy the remaining balance. This is why the renowned four-percent rule in personal finance persists. The four-percent rule aims to provide a continuous inflow of income to retirees while also maintaining a sufficient account balance to continue for many years. What if there was a method to extract 4% or more out of your portfolio each year without selling shares and lowering your principal?
Investing in dividend-paying equities, mutual funds, and exchange-traded funds is one strategy to boost your retirement income (ETFs). Dividend payments produce cash flow that might complement your Social Security and pension income over time. It may even give all of the funds necessary to sustain your pre-retirement lifestyle. If you plan ahead, it is feasible to survive off dividends.
What is the Vanguard FTSE 100?
- The Index is a market capitalization weighted index that measures the performance of the top 100 businesses trading on the London Stock Exchange that pass size and liquidity screening. The value of a company’s outstanding shares on the market is known as market capitalization, and it indicates the company’s size.
- The Fund aims to: 1. Track the Index’s performance by investing in all of the Index’s component shares in the same proportion as the Index. When full replication is not possible, the Fund will adopt a sampling method. 2. Remain fully invested and hold limited amounts of cash, unless the Fund is forced to deviate from its investment philosophy due to unusual market, political, or other circumstances.
Do FTSE ETFs pay dividends?
ETFs are often set up in one of two ways: income or accumulation. Dividends are paid out in cash to investors in income ETFs. Dividends are not paid by accumulation ETFs. The revenue is reinvested, causing the ETF’s price to rise.
Our thorough factsheets give you the most up-to-date information on an ETF’s payouts. Simply locate the ETF and go to the ‘at a glance’ tab to the ‘dividends’ section. Please keep in mind that dividend payments are subject to change and are not guaranteed.
Is FTSE 100 a total return index?
The FTSE UK Index Series is designed to represent the performance of UK companies by providing market participants with a comprehensive and complementary series of indexes that measure the performance of the UK equity market’s capital and industry segments.
- Please read our highlight page FTSE UK Index Series for additional information on the entire FTSE UK Index Series.
Headline indexes include:
- The FTSE 100 Index (UKX) is made up of the top 100 blue-chip businesses listed on the London Stock Exchange.
- FTSE 100 Total Return Index – calculates the underlying FTSE 100 index’s total return, which includes both capital and income (reinvested on the dividend (xd) date). Except for dividends paid by Royal Dutch Shell A Shares, which are subject to a 15% withholding tax, no withholding tax adjustments are made.
- For the total return index calculation, the FTSE 100 Net of Tax Index (UKXNUK) applies tax adjustments to dividends.
- The FTSE 250 Index, which includes mid-capitalized companies not included in the FTSE 100, accounts for about 15% of UK market capitalization.
- The FTSE All-Share Index is the aggregation of the FTSE 100, FTSE 250, and FTSE Small Cap Indexes, and it represents 98-99 percent of UK market capitalization.
- 18 real-time industry sector indexes generated from firms in the FTSE 100 and FTSE 250 indexes make up the FTSE 350 Supersectors Indexes.
Dividend Points Indexes
Calculated on the ex dividend (xd) date and expressed in index points, the cumulative value of ordinary cash dividends declared by individual components of the underlying FTSE 100 Index.
- No withholding tax adjustments are made to the FTSE 100 Declared Dividend Index (F1DIVD). Each year, at the start of the trading day after the third Friday in December, the index is reset to zero.
- FTSE 100 Dividend Index – RDSA Withholding (F1DIV) – FTSE 100 Dividend Index – RDSA Withholding (F1DIV) – FTSE 100 Dividend Index There are no withholding tax modifications; the only exception being dividends paid by Royal Dutch Shell A Shares, which are subject to a 15% withholding tax. Each year, at the start of the trading day after the third Friday in December, the index is reset to zero.
- FTSE 100 Cumulative Dividend Points Index (UKXCD) – The FTSE 100 Cumulative Dividend Points Index (UKXCD) is a stock market index that measures There are no tax withholding modifications performed. This index does not have a yearly rebase.
What does FTSE stand for?
The Financial Times Stock Exchange (FTSE), presently known as the FTSE Russell Group, is a British financial institution specializing in index offers for worldwide financial markets. The FTSE Russell Group is owned by the London Stock Exchange Group (LSEG). The LSEG owns the Borsa Italiana, Millennium IT, and other financial businesses in addition to the FTSE Russell Group.
