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The final couple of years have been nice for dividend inventory buyers.
Every year, forecasts for FTSE 100 dividend payouts have been rising. Properly, I say rising, however the charge of progress is being pared again.
I’ve learn the newest Dividend Dashboard from funding providers agency AJ Bell (LSE: AJB). And I see dividend forecasts for 2024 and 2025 are £10.3bn decrease than a yr in the past. That’s an 11.5% drop.
Yield falling
The FTSE 100 yield has dipped to three.8% for 2024, and 4.1% for 2025.
Not way back, the Metropolis anticipated 2024 strange dividends to smash by way of the file set in 2018. However the newest consensus of £79.7bn would fall 6.5% wanting the £85.2bn paid that yr.
Nonetheless, we is likely to be on for a brand new file in 2025… until forecasts are scaled again some extra within the subsequent 12 months.
Gloom?
Is that this unhealthy information for dividend buyers? Nope. I nonetheless assume we’re in a golden age for dividend shares.
A part of the autumn appears to be right down to companies shifting to share buybacks as a solution to return surplus money. In a time when share costs are traditionally low, I believe that’s good sense.
Russ Mould, funding director at AJ Bell, mentioned: “The worth of the buybacks introduced by 25 FTSE 100 members thus far in 2024 presently stands at £27bn, to maybe give the FTSE 100 a platform for a crack at 2022’s all-time excessive of £58.2bn, or least 2023’s provisional complete of £52bn.“
Buybacks added to strange dividends counsel an total money yield of 5.3% from FTSE 100 shares.
Financial system
Whereas I’m nonetheless upbeat about UK dividend shares, I do see some cause for warning. A few of the downgrades might be as a result of financial system, for certain.
No one thought inflation would get so excessive. Or rates of interest can be hiked thus far, and stay there for thus lengthy.
The decrease free spend from the UK inhabitants feeds by way of to decreased firm income, and fewer money accessible for dividends.
Future
What does the broader future for UK shares appear like? I count on loads might be pushed by market sentiment.
And what higher solution to see the place that’s going than to take a peek on the outlook for an funding agency, AJ Bell itself?
Dealer forecasts counsel we should always see earnings per share (EPS) rising by 25% between 2023 and 2026. And that may be right down to rising revenues from the agency’s buying and selling providers.
We may see the dividend rise by 22% in the identical time, with the yield rising to over 4%. Hmmm, and the inventory worth seems enticing… a P/E of 16, dropping to 14 by 2026, doesn’t have a look at all stretching.
Possibly I ought to think about including AJ Bell to my Shares and Shares ISA.
Bullish
Anyway, over the following 10 years, I believe FTSE 100 dividends may smash by way of that 2018 file… a number of instances. However that’s only a guess, only for enjoyable.
We may nonetheless see ache within the brief time period, if dividend money ought to slip. And the development for forecasts is down, for now.
However UK dividend shares are nonetheless tops for me.
