With 2020 not far off now, today I’ll be looking at the 2020 dividend forecasts for three of the UK’s most popular dividend stocks – Lloyds Banking Group (LSE: LLOY), Barclays (LSE: BARC), and Tesco (LSE: TSCO).
Below, you’ll find the current consensus dividend forecast, the prospective yield, the forecast dividend coverage, and some thoughts on each dividend stock. But always remember that dividend forecasts may not be accurate and are subject to change.
FY2020 dividend forecast: 3.55p
FY2020 prospective yield: 6%
Lloyds’ 2020 dividend forecast is currently 3.55p. This equates to a prospective yield of a healthy 6% at the current share price. Earnings for 2020 are expected to come in at 7.15p per share, which gives a dividend coverage ratio of approximately two.
My thoughts? Lloyds has put together a nice little dividend growth track record since reintroducing its dividend in 2014, and assuming the 2019 payout is higher than the 3.21p per share the bank declared for 2018 (we’ll find out in February), a 3.55p per share dividend for 2020 will represent the seventh consecutive increase. That’s a good achievement.
There are certainly risks that could impact Lloyds’ ability to continue increasing its dividend of course, but overall, the stock appears to be a cash cow, in my view. I like it as an income stock.
FY2020 dividend forecast: 9.49p
FY2020 prospective yield: 5.6%
Barclays’ 2020 dividend forecast is currently 9.49p. This equates to a prospective yield of 5.6%. Earnings of 23.5p per share are expected for 2020, which gives a dividend coverage ratio of around 2.5.
My thoughts? Barclays slashed its dividend heavily a few years ago, however the payout now appears to be on the rise again. Just recently, the bank announced a half-year dividend of 3p for the first half of 2019 and said that this is expected to represent “under normal circumstances, around one-third of the total dividend for the year.”
Looking at the big yield on offer and the solid level of dividend coverage, Barclays certainly looks interesting right now. That said, I’m a little hesitant about buying the stock for its dividend when it was only a few years ago that the company reduced its payout. I like to see a dividend growth track record of at least three to four consecutive dividend hikes when investing in dividend stocks.
FY2021 dividend forecast: 9.29p
FY2021 prospective yield: 4%
Tesco is a little different because its financial year ends 23 February. So, I’m going to look ahead to FY2021 (which is mostly in 2020). Here, the dividend forecast is 9.29p which equates to a prospective yield of around 4%. Earnings of 18.4p per share are anticipated, which gives dividend coverage of around two times.
My thoughts? Tesco is a bit like Barclays in that it hasn’t yet put together a solid dividend growth track record. After cutting its payout in FY2015, it paid no dividend at all in FY2016 or FY2017! Right now, Tesco’s dividend certainly appears to be on the up, but it’s still early days as the dividend was only reintroduced last year.
Given this lack of track record, and the fact that the supermarket landscape is likely to remain extremely competitive in the years ahead, I think there are better dividend stocks than Tesco at the moment.
Edward Sheldon owns shares in Lloyds Banking Group. The Motley Fool UK has recommended Barclays, Lloyds Banking Group, and Tesco. 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.