FTSE 100 dividend shares are my top choice for generating long-term passive income.
Who wants tech stocks lurching up and down daily when we could just buy a Footsie index tracker and expect an annual return of around 3.7% from dividends alone? That’s what the consensus of forecasts currently suggests, according to AJ Bell‘s latest Dividend Dashboard.
The survey gives us a quarterly update on what the City folk are thinking. They currently reckon FTSE 100 dividends could total £83bn in 2025. And this year we’ve also seen £28.9bn in buybacks already announced.
Dividend forecasts
Dividends are never guaranteed, mind. In fact, in recent years, the City analysts have been at their most bullish in the first quarter, then they’ve softened their expectations a bit.
Even so, it looks like FTSE 100 shareholders could be well rewarded with cash this year. And by 2026, the all-time dividend record of £85.2bn set in 2018 has a decent chance of being beaten.
Yield and cover
I want good dividend yields, but with sufficient earnings to easily cover them. Right now, I’m seeing a tempting 5.8% yield forecast for J Sainsbury (LSE: SBRY).
It’s boosted by a share price dip after Tesco lowered its forecasts for the year ahead. Blaming potential price wars, the UK’s biggest supermarket chain now expects £2.7bn to £3bn operating profit for the 2025-26 year, down from the £3.1bn just reported for 2024-25.
Sainsbury is due to report on 17 April, so that’s something to watch for.
Dividend cover
Sainsbury’s dividend looks like it should still have a bit safety, with the survey putting cover by earnings at a little over two times.
The year seems to going well, judging by January’s third-quarter update. CEO Simon Roberts said: “We have won grocery market share for the fifth consecutive Christmas, with more customers choosing Sainsbury’s for their big shop.”
The company maintained its full-year guidance, saying it expects retail cash flow of “at least £500m“.
The biggest risk does seem to be pressure on the dividend from price competition. But strong earnings and cash flow means this is definitely a dividend share I’m considering.
Property prospects
I like the dividend outlook for a couple of property-related stocks too. House builder Taylor Wimpey has a forecast yield of 8.4%, with a cover by earnings of about 1.6 times.
The industry isn’t out of the woods yet, not with interest rates and mortgages still high. But if the company makes this year’s dividend and shows good cash-flow prospects, I think it’s another for income investors to consider. The only thing that stops me is that I already have enough house builder shares.
Investment trust
LondonMetric Property is the other related one, with a 6.6% yield. It’s a real estate investment trust (REIT), and it puts some of its cash in retail parks, distribution facilities, and offices. So it’s going to face similar risks to the other two I’ve covered.
But we’re looking at expected cover of 1.4 times, which could provide a bit of dividend safety.
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