How Royal Bank Of Scotland Group plc Will Deliver Its Dividend

What investors can expect from Royal Bank Of Scotland Group plc (LON:RBS)’s dividend.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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.

Meanwhile, if you’re looking for a high and immediate income — 5.7% no less — you may wish to read about the Motley Fool’s No. 1 dividend stock.

You see, our top income analyst believes this high-yield company will provide investors with steady annual dividend growth for many years to come. Not only that, but he calculates the stock is trading today at 100p a share below current fair value of 850p.

To read the in-depth analysis of this dividend dynamo for free, simply click here.

> G A Chester does not own any shares mentioned in this article.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Investing Articles

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

Forget Lloyds’ cheap share price! I’d rather consider this FTSE 100 bargain share

Lloyds' share price might appear too cheap to miss at first glance. But this FTSE-listed share could be a better…

Read more »

Market Movers

Down 6% today, is the BT share price gearing up for a larger fall?

Jon Smith points out why the BT share price has tumbled today, but flags up why the reasoning behind the…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

This FTSE 100 stock is down 25% from its 52-week high. Should I buy?

Analysts think the price-to-earnings ratio of this FTSE 100 stock could fall by half in the next two years if…

Read more »

Investing Articles

£10,000 invested in Nvidia stock just two weeks ago is already worth…

Nvidia stock's been making big losses and big gains so far in 2025, at least on paper. But long-term valuation…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Here’s why Lloyds shares have dipped sharply

Lloyds shares got a boost recently when the Treasury petitoned the Supreme Court to go easy on the car loan…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

A £10,000 investment in BAE Systems shares 5 years ago is now worth…

BAE Systems' shares have lifted off since the start of the decade. But can the FTSE 100 defence giant continue…

Read more »

Dividend Shares

£8,000 invested in high-yield dividend stocks could make this amount of passive income

Jon Smith explains how dividend shares with yields in excess of 8% can be used carefully in order to build…

Read more »

Investing Articles

£5,000 invested in Tesco shares 2 years ago is now worth…

Over the last two years, Tesco shares have provided investors with gains of around 30% per year when dividends are…

Read more »