After a bumper 2021 for FTSE 100 dividends, the party is expected to slow down this year. That does not mean it is over, however. A number of stocks are still expected to increase dividends even now. This is great news for stock markets in general, but I do not see it as a reason to indiscriminately buy stocks.
Glencore’s expected bumper dividend
Consider for instance, the FTSE 100 stock with the fastest expected dividend growth. As per AJ Bell research, this is the commodity miner and marketer Glencore (LSE: GLEN). Now, I have absolutely nothing against the stock. In fact, I held it until earlier this week. And it rewarded me well. But I just do not see enough upside to it at the current levels.
Why I’m not convinced about the FTSE 100 stock
I think there is general consensus around the fact that commodity stocks as a whole could see a relatively sluggish 2022. This follows a scorching 2020 that spilled over into much of 2021 as well. Industrial metal prices are expected to soften now as there is a pullback of government spending. And Glencore is already trading at a high price-to-earnings (P/E) of 35 times, much higher than for its FTSE 100 peers. This leaves me unconvinced about whether it could see much more price increase, even with an increase in dividends.
It is possible the economic recovery could be so sharp this year, that we end up having an unexpected boom in industrial metals anyway. Also, its earnings might be big enough in the next few months to make its relative price appear far more reasonable. This alone would make a case for its share price to rise. But this is all in the realm of speculation for now. I have a full-length article out on it on Monday, for anyone who might be interested, on my reasoning for selling my stockholding of Glencore.
Royal Dutch Shell, I like
Here, I would like to turn my attention to the FTSE 100 stock that is expected to show the next biggest dividend growth in 2022, Royal Dutch Shell (LSE: RDSB). This is a stock I like for right now. In fact, in another article published yesterday, I talk about why I would now buy more of its shares. In summary, the reasons include a largely continued increase in oil prices since late 2020 and the likelihood of continued economic recovery that could continue to strengthen its financials. Further, its recently announced share buyback is also likely to positively impact its share price.
There is a downside here too, though. My investments in oil stocks need constant monitoring. The world is now intent on moving towards clean energy, and companies like Shell are still trying to pivot in that direction. It remains to be seen what their future will look like in the next decade. But, I think for the foreseeable future, Shell could do quite well. I’d buy more of it, after it has already been very gratifying for me to hold in 2021.
