The dividend forecasts provided by City analysts can provide us with a good guide on how much income to expect from our shares over the coming year.
Although these broker forecasts aren’t guaranteed, my experience is that they’re usually reasonably accurate, especially for FTSE 100 stocks.
For this review, I’ve pulled together the latest dividend estimates for insurer Aviva (LSE: AV), mining group Anglo American (LSE: AAL) and consumer goods firm Reckitt Benckiser (LSE: RKT).
Aviva: 7% + bonus payout
This UK insurer has undergone a remarkable turnaround since CEO Amanda Blanc took charge in 2020. As a result, the group’s cash generation has improved, and the dividend has returned to growth after being cut by nearly 50% in 2019.
Unusually, Aviva has already specified the size of its 2023 dividend, so I’ll use this guidance instead of broker forecasts:
- Aviva 2023 dividend guidance: 32.5p per share
- Forecast dividend yield: 7.3%
The payout above is the company’s ordinary dividend, which I’d expect to increase gradually in future years.
However, Aviva is also planning to “return further capital to shareholders in 2023”. We don’t know how much this will be yet, but I expect it to be a significant amount in addition to the ordinary dividend.
Aviva shares look good value to me on a 2023 price-to-earnings (P/E) ratio of 8, with a 7%+ yield. I see them as a sensible buy for income.
Anglo American: bad timing?
Profits at FTSE 100 mining group Anglo American have soared in recent years. These gains have mostly been due to surging prices for commodities such as iron ore, coal, and platinum.
However, commodity prices tend to move in boom-and-bust cycles. City analysts seem to think prices might have peaked for now. They expect Anglo’s after-tax profit to fall from $8.6bn in 2021 to $5.4bn in 2023.
The dividend is also expected to fall. This suggests to me that last year’s bumper payout of $2.89 per share won’t be repeated any time soon:
- Anglo American 2023 forecast dividend: $1.76 (146p) per share
- Forecast dividend yield: 4.6%
In my view, anyone investing in this stock needs to take a view on the market cycle. If miners are on the way down, then I think it makes sense to wait before buying. But if commodity prices stay high because of world events, then I think Anglo American could be decent value today.
Reckitt: a buy-and-hold dividend
Consumer goods and healthcare group Reckitt hasn’t cut its dividend for at least 20 years. I don’t think it will in 2023 either. The company — whose brands include Dettol, Finish, and Durex — is expected to report a 15% increase in operating profit for 2022.
Analysts expect a slower rate of growth in 2023. However, they still expect Reckitt’s dividend to return to growth after being frozen at 175p since 2019:
- Reckitt 2023 forecast dividend: 180p per share
- Forecast dividend yield: 3.2%
Reckitt shares peaked at £79 in 2017 and have performed poorly since — they trade at £57, as I write. But I think the company’s problems and mistakes have largely now been addressed.
The shares currently trade on a P/E ratio of 16 and offer a 3.1% yield. I see this business as a long-term buy.
