- Analysts are expecting less from the FTSE 100 in terms of yield in the next year
- The dividend increases we have seen are concentrated among a handful of companies
Unloved as it has been in recent years, the UK market has at least been a stalwart for dividend hunters. The FTSE 100 often tends to offer a yield of around 4 per cent, with something much juicier available from selected shares. Companies such as Lloyds Banking Group (LLOY) and Rio Tinto (RIO) offer yields north of 5 per cent, with others such as Vodafone (VOD) and British American Tobacco (BATS) recently on double-digit yields.
The income expected to come from the market does seem to be slipping, however, with AJ Bell's latest Dividend Dashboard report showing yield forecasts for the FTSE 100 falling back.
Aggregate ordinary dividend forecasts come to £79.7bn for 2024, representing a 3.8 per cent yield, and to £84.9bn or 4.1 per cent for 2025. AJ Bell notes that such forecasts have "taken a hit", with the estimates for 2024 now 11.5 per cent lower than they were a year ago. The current forecast for 2024 is 6.5 per cent below the all-time high of £85.2bn paid out in 2018.
| The biggest forecast dividend increases for 2024 | |
|---|---|
| Company | Size of increase (£mn) |
| Flutter Entertainment | 441 |
| Glencore | 346 |
| Rolls Royce | 204 |
| AstraZeneca | 190 |
| Rio Tinto | 187 |
| BP | 169 |
| Shell | 155 |
| Lloyds | 139 |
| GSK | 118 |
| Admiral Group | 96 |
| Source: AJ Bell | |
What might be the culprit? The recent frenzy for share buybacks among UK-listed companies may be one, with executives deciding to use cash for this purpose instead. AJ Bell notes that FTSE 100 companies have already unveiled plans to carry out £27bn of buybacks so far in 2024.
This further fuels the debate about whether shareholders should applaud companies making a savvy call by hoovering up their own stock at depressed valuations, or whether payout levels should be prioritised. However, AJ Bell notes that such measures do supplement dividend payments: a combination of ordinary dividend payments, special dividends and buybacks are expected to come to £109.9bn in 2024 alone, equating to 5.3 per cent of the FTSE's £2.1tn market cap.
Turning to where dividends actually are increasing, growth seems to be concentrated among a handful of companies. Ten of these, including Flutter (FLTR), Glencore (GLEN) and Rolls Royce (RR.), are increasing payouts by £2bn between them (see table).
