I’m looking at some of your favourite FTSE 100 companies and examining how each will deliver their dividends. Today, I’m putting taxpayer-owned bank Royal Bank of Scotland (LSE: RBS) (NYSE: RBS.US) under the microscope.
Dividend desolation
Royal Bank of Scotland doesn’t currently pay a dividend. In fact, shareholders haven’t seen a penny since 2008. The global financial crisis, the company’s chimerical assets and a government bailout did for the dividend.
Dividend prospects
How soon might RBS resume its dividends? The only certainty at the moment is that the company is closer to sending some cash shareholders’ way than it’s been at any time during the past five years. Let’s take a look at analyst forecasts — sourced from Digital Look — for both RBS and fellow part-nationalised bank Lloyds.
RBS
| Year end | 6 months ago |
1 month ago |
Current |
|---|---|---|---|
| 31 December 2013 | 0.36p | 0.00p | 0.00p |
| 31 December 2014 | 3.08p | 1.74p | 1.44p |
Lloyds
| Year end | 6 months ago |
1 month ago |
Current |
|---|---|---|---|
| 31 December 2013 | 0.17p | 0.35p | 0.66p |
| 31 December 2014 | 1.06p | 1.59p | 2.11p |
A year ago, the consensus among analysts was for RBS to pay a 1p dividend for the year ending December 2013. However, as you can see from the table, the consensus came down to 0.36p six months ago, and hopes for 2013 have now faded to the extent that no dividend at all is expected.
Similarly, consensus forecasts for 2014 have been in decline, in part because more analysts have penciled in a zero dividend from RBS for next year, too.
The forecasts for RBS contrast with those for Lloyds. Analysts have become increasingly bullish on Lloyds’ dividend prospects for both 2013 and 2014. The forecasts give yields of 0.9% and 2.9%, respectively, at a current share price of 74p.
The analyst consensus has RBS a year behind Lloyds in resuming dividends. And RBS’s forecast first-year dividend, at a current share price of 336p, gives a yield of just 0.4% — less than half Lloyds’ first-year forecast yield.
As things stand, then, RBS is not expected to pay a dividend until next year at the earliest. Furthermore, the analyst consensus on the 2014 payout has come down from six months ago, in part because some analysts have pushed their forecasts for a resumption of dividends back to 2015.
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> G A Chester does not own any shares mentioned in this article.
