2020 dividend forecasts: BP, Vodafone and Astrazeneca

Paul Summers takes a look at what income investors might expect from three FTSE 100 (INDEXFTSE:UKX) favourites next year.

| 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.

Earlier this month, my Foolish colleague Edward Sheldon looked at the dividend credentials of FTSE 100 financial giants Lloyds and Barclays, as well as revived supermarket Tesco going into 2020. Today, I’m doing the same with three other stocks, all of which are popular with those investing for income.

As Edward quite rightly stated back then, please remember that the numbers stated below are subject to change, particularly as we could see quite a bit of movement in the market before and after the election


FY2020 dividend forecast: 41.2 cents (32p)
FY2020 prospective yield: 6.41%

Oil behemoth BP (LSE: BP) hasn’t had the best time of late, giving away the gains it had made in the first few months of 2019 over the second half of the year due to a falling oil price. That said, a lower valuation means the dividend yield now stands at 6.41% — more than the FTSE 100 average and slightly higher than Royal Dutch Shell. This payout is likely to be covered by earnings almost 1.4 times. That’s a little lower than I would normally like, but certainly better than it once was.

As always, a lot depends on things BP can’t control. Assuming 2020 brings the black gold bulls back from the shadows, however, now might be as good a time as any to invest.  


FY2021 dividend forecast: 9.4 cents (8.1p)
FY2021 prospective yield: 5.17%

There was a time when I would avoid shares in Vodafone (LSE: VOD) like the plague thanks to its dogged refusal to reduce its unaffordable dividend. Now that this has finally happened, I’m prepared to be a little more welcoming. Considering that its share price has climbed 19% since the announcement back in May, it seems I’m not alone. 

That’s not to say that I think income investors should necessarily pile into the stock. Vodafone’s proposed 9.4 cents per share cash return in FY2021 (beginning 1 April 2020) will still only be covered just 1.1 times by expected profits. Moreover, the company still carries an extraordinary amount of debt on its balance sheet — the reduction of which will depend on its ability to offload its European mobile mast business and continue taking contracts from rivals (the recent capture of Virgin Media from BT is an example). 

2019 could go down as the year that Vodafone’s fortunes began to turn, but I’d still proceed with caution. 


FY2020 dividend forecast: 275 cents (214p)
FY2020 prospective yield: 2.89%

Pharmaceutical powerhouse Astrazeneca (LSE: AZN) has been one of the index’s standout performers in 2019 with the share price a little over 25% higher today than where it was at the start of the year.

In contrast to the situation at BP, this has resulted in Astra’s yield moving lower. The firm is expected to return around 214p per share in FY2020 which equates to a yield of just 2.89%. Positively, dividend cover has improved over recent years and next year’s cash payout should be covered around 1.56 times by profits.

My only real concern with Astrazeneca right now is that the stock looks expensive relative to the general market and to peer GlaxoSmithKline (at 27 vs 14 times forecast earnings). Should sterling rise on December 13 following a perceived breakthrough on Brexit, it’s possible the former’s share price could come off the boil (since Astra makes most of its money overseas). As such, anyone considering the stock may wish to put off their purchase for now.

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.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Investing Articles

The National Grid share price just plunged another 10%. Time to buy?

The National Grid share price is one of the FTSE 100's most stable, and nothing much happens to it? Well,…

Read more »

Young Black woman looking concerned while in front of her laptop
Investing Articles

Up 15% in 3 months, but I still won’t touch Vodafone shares with a bargepole

Harvey Jones has been shunning Vodafone shares for years. The FTSE 100 stock is finally showing signs of life, but…

Read more »

Growth Shares

This UK stock could be like buying Nvidia in 2021

Jon Smith thinks he's missed the boat with Nvidia shares, but flags up a UK stock that has some very…

Read more »

Businesswoman calculating finances in an office
Investing Articles

The FTSE 100’s Intertek delivers a bullish update — can the share price soar?

I’d describe Intertek as a quality business with a decent dividend income, but will the share price shoot the lights…

Read more »

Market Movers

Up another 10% yesterday, how high can the Nvidia share price go?

Jon Smith talks through the latest results but flags up why further gains could be harder to come by for…

Read more »

Investing For Beginners

Down 43% in a year, I think this value stock is primed for a comeback

Jon Smith flags up why a FTSE 250 share has fallen so much in the recent past, but explains why…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Nvidia stock is stupidly expensive. Or is it?

Nvidia stock's up over 2,000% in the past five years. Christopher Ruane explains why it could be wildly overvalued --…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

The FTSE 100 stock I’ve been buying this week

Stephen Wright thinks the FTSE 100 slipping back this week has offered an opportunity in one of the highest-quality UK…

Read more »