Every quarter, I eagerly await the latest edition of investment platform AJ Bell‘s highly informative FTSE 100 Dividend Dashboard report. The latest issue dropped today, so here are my takes from it.
FTSE 100 dividends set to leap
Analysts’ dividend forecasts for the FTSE 100 index for this year and 2024 have softened. This is due to higher interest rates, falling commodity prices, and rising fears of a UK recession.
Hence, it appears that total FTSE 100 dividend payouts for 2022 will be lower than 2021’s turnout. But the great news is that AJ Bell expects Footsie dividend growth of 11% in 2023, plus another 7% in 2024.
If this FTSE 250 firm’s calculations are correct, this would leave 2024’s dividends almost 18.8% above the payout for last year. And that’s one reason why I love share dividends for passive income.
Buybacks make a comeback
As well as paying out cash dividends, companies boost investors’ returns by buying back their own shares. Doing this reduces their share bases, which means the same profits are shared among fewer shares. Over time, this lifts both earnings per share and dividends per share.
AJ Bell reports that Footsie companies have already announced or begun buyback programmes worth £22.7bn so far this year. In total, 23 FTSE 100 firms have gone down this route this calendar year. Last year saw £55.2bn of buybacks, so 2023 is already off to a solid start.
The UK’s 10 dividend dynamos
This report predicts a cash yield of 4.2% for the Footsie in 2022, with total dividends for last year of £76.4bn. This year, this figure is expected to leap to £84.8bn, both excluding special (one-off) dividends.
Importantly, more than half — 55% — of all FTSE 100 dividends are expected to come from just 10 companies. These dividend Goliaths are forecast to pay out £46.6bn in cash this year. Furthermore, the top 20 dividend payers will produce £62.1bn (73%) of the Footsie’s total cash windfall.
Here are the FTSE 100’s 10 biggest payers by dividend size:
| Company | Dividend (£m) | Dividend yield (%) | Dividend cover | Cut in last decade? |
| HSBC | 9,117 | 8.5% | 2.2 | 2019, 2020 |
| Shell | 6,624 | 4.4% | 4.1 | 2020 |
| BAT | 5,446 | 8.5% | 1.5 | |
| Glencore | 5,057 | 9.1% | 1.9 | 2015, 2016, 2020 |
| Rio Tinto | 4,354 | 5.1% | 1.5 | 2016, 2022 |
| Unilever | 3,875 | 3.6% | 1.3 | |
| AstraZeneca | 3,864 | 2.2% | 2.0 | |
| BP | 3,843 | 4.4% | 4.1 | 2020 |
| GSK | 2,294 | 4.0% | 2.3 | 2022 |
| Vodafone | 2,139 | 8.9% | 0.9 | 2018 |
Through FTSE 100 index-tracking funds, my wife and I effectively own stakes in all 10 of these dividend behemoths. In addition, we have direct holdings in Rio Tinto, GSK, and Vodafone — all bought for their market-beating cash yields.
The average dividend yield across all 10 stocks comes to a tidy 5.9% a year. Although this easily exceeds the interest rate paid by any UK savings account, future dividends are not guaranteed.
Indeed, dividends can be cut or cancelled at any time — as can be seen in my table’s final column. In total, this lists 11 different dividend cuts across these 10 giants.
Summing up, I’m delighted with this latest report. If it proves correct, then the cash payouts from my shareholdings are set to rise for the next two years. And that’s great news to me!
