We’re likely heading into recession this year, and analysts have already been cutting back some of their outlooks on dividend stocks. So how could 2023 possibly make it as the best ever year for Footsie dividends? It might not sound very likely, but that’s exactly what forecasts suggest could happen.
In 2018, the FTSE 100 delivered its biggest dividend haul of all time, reaching £85.2bn. That fell when Covid-19 arrived. But it’s on the way back. We don’t yet know how 2022 will turn out, though analysts expect it to fall short of the record.
But, according to AJ Bell‘s quarterly Dividend Dashboard, the Footsie entered 2023 with forecast dividends of £85.8bn on the cards. And if that’s not enough, the pundits expect it to top £90bn in 2024.
By December, FTSE 100 companies had also announced share buybacks totalling £55.2bn. I reckon we could be seeing nice opportunities for investors to lock in some long-term passive income here.
Biggest payouts
Rising energy prices are contributing to 2023 dividend expectations. BP has recorded its biggest profits in its 114-year history. And we’ve just seen record profits for Shell too. Oil prices are down from their 2022 peak. But Brent Crude is still selling very profitably at around $85 per barrel (at the time of writing).
Shell had previously topped the FTSE 100 dividend table in terms of total payout. After a dividend cut in 2020, it was knocked off the top spot by Rio Tinto. But now it’s back as the forecasters’ favourite in the dividend payout stakes.
Dividend stocks
I’m not just looking for dividend stocks with the biggest yields. I also want decent cover by earnings.
Glencore looks good, with a predicted dividend yield of around 8%. The cash is expected to be covered around three times by earnings, providing a healthy margin for safety.
Glencore has something else I like, too. It’s currently engaged in a share buyback, which says two things. One is that the company thinks its own shares are worth buying at today’s price. And it should help future yields, with payouts spread across fewer shares.
Buybacks
Barratt Developments is also buying back its own shares. The forecast yield stands at around 7.6% now that the shares have recovered some of their 2022 losses. Cover by earnings is possibly a bit thin at around 1.5 times. But it’s a long-term cash generator.
And then financial shares offer attractive potential yields with reasonably healthy cover. Lloyds Banking Group, for example, is on a forecast yield of about 4%. And it looks like it should be covered about three times.
And then we have insurer Legal & General, with a forecast yield of over 7% and cover of 1.8 times.
Verdict
These stocks all carry their own individual risks. And I’d need to investigate further before buying any. But I’ve chosen them just to illustrate some of the FTSE 100 dividend stocks that look, on the face of it, like they could contribute to a new record year.
