FTSE 100 dividend to rise close to all-time highs in 2021 and 2022

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Total dividend payments from FTSE 100 companies are expected to climb close to their highest ever level this year, despite the lingering impact of the pandemic.


London’s blue chips are on course to pay out GBP84.1bn in dividends this year, according to calculations by AJ Bell, after estimates for the fourth quarter of the year were upgraded by analysts.


This total would represent a 36% increase from the GBP61.8bn paid out last year and would come close to the record-setting GBP85.2bn from 2018, according to AJ Bell’s dividend dashboard, which keeps track of all current forecasts.


Dividends from the index’s constituents are forecast to rise to GBP85.1bn in each of the next two years, based on existing analyst forecasts.


Total payments this year look like getting “tantalisingly close” to the high water mark from 2018, said AJ Bell’s investment director, Russ Mould, as corporate profits, cash flows and confidence look to recover from the effects of the pandemic.


“Dividend forecasts for 2021 have advanced for the fourth quarter in a row, buoyed by more optimistic forecasts for miners in particular.”


Current forecasts reflect higher industrial metals prices, although sharp drops in copper and iron ore seen last month could potentially put a lid on this positive forecast momentum, should these new levels persist.


Based on present estimates, not only are dividends due to increase in the coming two years, but the level that dividends are covered by earnings is also improving, notes Mould.


“The aggregate earnings cover ratio for the FTSE 100 is now forecast at 1.77 in 2021, an improvement on 2020’s 1.45 times earnings cover.”


But, the analysis noted that just 10 of the FTSE companies are generating 80% of this year’s dividend increase.


Rio Tinto PLC (LSE:RIO) and BHP Billiton PLC are the biggest payers, and with them included miners make up five of the six biggest forecast dividend increases in 2021.


This number dwindles to just two based on forecasts for 2022, however based on current forecasts.

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