Lloyds Banking Group (LSE:LLOY) and Vodafone (LSE:VOD) are the only two FTSE 100 stocks trading for less than £1.
Since the start of 2020, they have fallen 25% and 53%, respectively. This has helped push their yields higher, and made them increasingly popular with income investors.
I’ve both of them in my portfolio and therefore have an interest in their dividends. I’m going to look at the latest forecasts to see what I might receive in 2024.
A dark horse
Based on the average of the 20 analysts covering the stock, Lloyds is expected to pay a dividend of 2.7p in 2024 (in respect of its 2023 financial year), rising to 3.71p in 2026.
But there might also be a special dividend.
The bank has previously written down a loan of £700m advanced to the former owners of The Daily Telegraph. A deal has recently been concluded to sell the newspaper.
Under the agreement, Lloyds is believed to have been repaid in full. According to Sky News, this could lead to a reversal of a £500m provision made against the loan. If this amount is returned to shareholders, there would be an additional 0.78p paid in 2024.
However, it must be pointed out that the deal is subject to government approval. And the bank hasn’t said it will make any special payments.
A return of 2.7p — which looks likely to me — implies a current yield of 5.7%.
An extra dividend of 0.78p would push this to 7.3%.
Feel the connection
Vodafone has paid a dividend of 9 euro cents (7.74p at current exchange rates) since its 2019 financial year. This is a 40% reduction on the amount returned for 2018.
The cut was brought about by falling profitability. Since then, revenues have been flat and underlying earnings continue to disappoint.
But if a dividend of 9 euro cents is maintained, the stock is currently yielding a massive 11.2%.
Such a high yield suggests investors have their doubts that the payout can be maintained at this level.
And most of the 10 analysts covering the stock appear to agree with this assessment. The average of their forecasts for 2024 is 7.62p, and 7.24p for 2025. Although, the most bullish is expecting an increase — to 9.09p — next year.
But I’m more optimistic than most.
The current chief executive has only been in the post since the start of 2023. If the dividend was going to be cut, I reckon she would have done this soon after taking over. She could have blamed her predecessor and started her tenure with a clean slate.
Also, the company is expecting to receive at least €4.1bn in cash in 2024, from the sale of its operations in Spain. It’s also considering an offer to merge its business in Italy, in return for €6.5bn.
I think most of this will be used to pay down some of Vodafone’s large debt. But it will also provide a useful cash buffer, which could be used to maintain the dividend, should funds be tight.
I’m therefore expecting to receive 9 euro cents in 2024.
Final thoughts
Of course, dividends are never guaranteed. This makes predictions difficult.
But if my forecasts are correct, I’d be happy.
It would mean both Lloyds and Vodafone are currently yielding well above the FTSE 100 average of 3.9%.
