Dividend payouts forecast to hit record highs in 2023
Update
Total dividend payments from the FTSE 100 are forecast to hit a new record in 2023, with a predicted £85.8bn heading to investors, according to AJ Bell.
Profit growth is expected to slow in 2023 and grind to a halt in 2024, but key sectors such as oil and gas are set to continue delivering strong dividend payouts throughout 2023.
Meanwhile, total dividend pay for 2022 is predicted to reach £79.1bn, putting it above 2021’s total of £78.5bn, but below 2018’s record £85.2bn. This predicted dividend payout would mean the FTSE had yielded 3.8% in 2022.
AJ Bell investment director Russ Mould explained ‘Concerns over increases in input costs, interest rates, and therefore the cost of capital, and a possible recession are all factors weighing on 2022. A rally in the pound also decreases the sterling value of dollar-denominated payments from oils and miners.’
Miner Glencore, however, saw skyrocketing growth in dividends in 2022, with dividend growth of £3.3bn compared with second-placed HSBC, at £1.2bn. Meanwhile, those with the biggest dividend declines in 2022 included Rio Tinto and GSK at £1.6bn. In overall dividend payouts, Shell returned to the top spot for 2022, paying out £6bn over the year, compared with Glencore's £5.7bn and Rio Tinto's £5.6bn.
The top ten payers combined are now set to generate 54% of 2022’s total payment. In terms of highest dividend yield for 2022, Persimmon and M&G led the way in double digits, at 15.3% and 10.4% respectively.
Mould cautioned that ‘Forecast yields of more than 10% may make investors a little wary, given the shocking record of firms previously expected to generate such bumper returns, including the likes of Vodafone, Shell and, when they were in the FTSE 100, Royal Mail, Marks & Spencer and Centrica. All were forecast to generate a yield in excess of 10% at one stage or another and cut the dividend instead.’
Mould also highlighted the rise in share-buyback programmes as a key part of dividend data. More than 40% of FTSE 100 members, he said, are now running share-buyback programmes. He noted that ‘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.’