Here’s why FTSE 100 dividend stocks could shine in 2024

Forecasts have been cut back a bit, but UK dividend stocks could still be set for the best few years of cash returns ever.

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The Footsie is today no higher than it was way back in 2017. That’s not good for growth investors. But it could be great for those of us who buy dividend stocks.

Share prices have stagnated. But, apart from a brief pause for some in the pandemic, dividend yields just get better and better.

I can see why some investors might shun stocks now. When bond yields are high, and some Cash ISAs pay 5%, why take the risk?

Slowing forecasts

As the year has gone on, analysts have cut back earnings forecasts. And the longer high inflation and interest rates stay with us, the more we could see optimism fading.

But, broker forecasts are bullish over 2023. According to investment firm AJ Bell, analysts still expect FTSE 100 earnings to grow 10% this year.

And it could be the second best year ever for cash returns from top UK stocks.

What’s more, we might be on for a new record by 2025, with close to £90bn paid in FTSE 100 dividends.

Caution

These estimates have been scaled back this year. So we can’t just assume this will all come true.

I mean, not long ago, it looked like we’d have a new dividend record in 2024. But that’s slipped back.

Still, profits are rising, cash flow looks increasingly healthy, and a large number of FTSE 100 companies are buying back their own shares.

There’s money to hand back, and they think the best way to distribute the extra is through share buybacks. That should enhance future earnings and dividends per share, with fewer shares to spread it all across.

Share prices cheap

It only makes sense when share prices are cheap, though. So it looks like our top company boards think just that.

And when I see all these stocks valued at no more than they were worth in 2017, things just look wrong to me.

I could be cautious and put my money into a Cash ISA for now. That would get me a bit of safety while I wait for interest rates to fall, and make the risk of stocks worth taking again.

But by the time that happens, won’t everyone have seen and done exactly the same? And won’t that make dividend stock prices higher and yields lower?

All change in 2024?

Why do I think 2024 could be a pivotal year?

When interest rates fall, that’s got to be when folks start moving money back from Cash ISAs and bonds, and into stocks again, I’d have thought.

And I reckon there has to be a good chance of that happening in 2024.

Now, the longer interest rates stay high, the greater the chance I’ll be wrong. And these earnings and dividend forecasts could well be cut further as we get closer to 2024.

Buy, or wait?

So, our dire economy could keep FTSE share prices low for some time yet.

But I invest for the long term. So I’ll keep buying dividend stocks when I think they’re cheap, and ignore the short-term distractions.

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.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Aj Bell Plc. 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.

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