Last week, I wrote about how UK share dividends slumped in 2020, crashing by a massive £50.7bn. After Covid-19 restrictions arrived last March, many companies decided to cut, cancel or suspend their shareholder payouts. However, with mass vaccinations under way and lockdowns to be relaxed eventually, company earnings may rebound. A number of FTSE 100 heavyweights should return to paying regular dividends. And that’s good news for dividend investors and lovers of passive income like me.
Share dividends to recover in 2021?
I’m very hopeful that UK share dividends will bounce back this year, not least because I have a windfall to invest. In a couple of months, I will put another £300,000+ in cash to work in our family portfolio. I hope for this lump sum to generate an annual passive income of £12,000+. That’s a modest income yield of 4% a year — something that can be generated by high-yielding FTSE 100 shares. And with investment firm A J Bell predicting total UK dividends of £70.8bn this year, I want to grab my fair share for my family.
The biggest dividends come from the largest businesses
Not every UK-listed company pays dividends. In fact, most don’t and instead reinvest their profits into growth. As a result, UK share dividends are extremely concentrated, with the lion’s share being paid by a handful of global giants. In fact, more than half of this year’s dividends will come from just 12 Footsie heavyweights.
Right now, I’m worried that US stocks are in a bubble phase, making them too expensive for me. I’ve decided to reduce my portfolio risk by investing heavily in boring, reliable British businesses. Ideally, I’m on the lookout for lowly rated UK stocks that pay generous share dividends.
The 12 Goliaths of the FTSE 100
With warning signs of investor mania and market madness emerging, I prefer to invest in businesses that I think should be able to ride out any storm. For example, these 12 FTSE 100 firms all have market values above £40bn, making them among the biggest payers of UK share dividends. I’ve also added the forecast 2020 dividend for each share.
Company | Market value | 2020 forecast dividend
- Royal Dutch Shell |£109.3bn | £4.2bn
- Unilever |£105.3bn | £3.9bn
- AstraZeneca £96.3bn | £2.8bn
- HSBC Holdings | £87.1bn | £1.3bn
- Rio Tinto | £78.1bn | £4.0bn
- Diageo | £71.2bn | £1.6bn
- GlaxoSmithKline | £64.0bn | £4.0bn
- British American Tobacco | £63.1bn | £4.9bn
- BP | £56.6bn | £4.4bn
- BHP Group | £47.7bn | £1.9bn
- London Stock Exchange Group | £46.0bn | £0.3bn
- Reckitt Benckiser Group | £44.9bn | £1.2bn
I want my share of 2021’s share dividends
The total market value of these dozen giants comes to just short of £870bn. That’s close to half of the market capitalisation of the FTSE 100. And these 12 stocks’ combined cash dividends for 2020 come to a whopping £34.5bn. That’s close to half of all the dividends expected to be paid by Footsie firms for that year.
As a value investor seeking bumper dividends, I’m attracted to these dividend dynamos. Who wouldn’t want to share in almost £3bn a month of regular cash payments? That’s why my future focus will be on investing in several of these. This should help me to generate a passive income. And I’ll be making full use of tax-free Stocks and Shares ISAs and pensions to capture these bumper dividends.
Bit I always remember that company dividends aren’t guaranteed. They can fall or be cancelled without notice, as we gloomily discovered in 2020.
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Cliffdarcy owns shares in GlaxoSmithKline. The Motley Fool UK has recommended Diageo, GlaxoSmithKline, HSBC Holdings, and Unilever. 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.