FTSE 100 pay-outs are forecast to reach a record high of £85.8bn in 2023, according to AJ Bell’s ‘Dividend Dashboard’ report for the final quarter of 2022.
The current record for total dividends from the UK’s biggest businesses was set in 2018 when £85.2bn was paid out to shareholders.
AJ Bell investment director Russ Mould (pictured) said: “Analysts do expect 2023 to – just – set a new record-high for FTSE 100 ordinary dividend payments, even if profit growth is expected to slow, and then grind to a complete halt in 2024.
“Pre-tax income is expected to rise by 10% in 2023, while ordinary dividends are seen rising by 8% to £85.8bn. This may reflect the additional room for manoeuvre offered by 2022’s forecast dividend cover of 2.24x – the best figure since 2012.
“The lofty dividend cover ratio may also be the result of more than 40% of FTSE 100 members running share buyback programmes as an alternative means of returning cash to their shareholders. FTSE 100 firms have, to date, announced £55.2bn of share buybacks in 2022. That is way in excess of the peaks of 2006 and 2018, which came in between £33bn and £34bn.”
2022 yield up after autumn rally
According to AJ Bell, the index is now expected to yield 3.8% for 2022 after a rally in the autumn, while total pay-outs for the year are expected to be £79.1bn. This represents a modest increase from the £78.5bn recorded last year.
“Concerns over increases in input costs, interest rates – and therefore the cost of capital – and a possible recession are all factors weighing on 2022,” Mould observed. “A rally in the pound also decreases the sterling-terms value of the dollar-denominated payments from oils and miners. The oil and gas sector is giving support to dividend growth estimates for 2023, although this may make some investors nervous as oil threatens to close out 2022 where it started the year, at below $80 a barrel.”
Oil giant Shell is forecast to pay out the most dividends in 2022 at £5.9bn, narrowly ahead of Glencore (£5.7bn) and Rio Tinto (£5.5bn).
The highest-yielding individual stock on the FTSE 100 for the year, meanwhile, is expected to be Persimmon at 15.3%, while fund manager M&G is also expecting a double-digit yield of 10.4%. Mould cautioned that forecast yields above 10% may make investors wary when factoring in the records of firms such as Vodafone and Shell, who had previously forecast a bumper yield before cutting their dividend instead.