FTSE 100 companies are expected to return a total of £84.8 billion in 2023, compared to £76.4 billion in 2021 according to AJ Bell’s latest Dividend Dashboard. The report considers the highest dividend yields in the FTSE 100 and can be a good place to start when looking for investments.
This figure has been downgraded from earlier forecasts thanks to fears of a recession, rising interest rates and weakness in commodity prices.
Record FTSE 100 dividends expected in 2023
Payouts in 2023 were forecast to hit a record level, but as the economic outlook has deteriorated, analysts have revised their projections lower.
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“The FTSE 100 will not quite match 2018’s record ordinary dividend payment in 2023, but the index will then exceed it and set a new record in 2024.,” AJ Bell’s Dividend Dashboard report explains.
However, “analysts do not seem entirely confident in their forecasts” due to the mixed economic outlook and falling commodity prices, which are projected to have a big impact on profits in 2023, as they did in 2022.
“Aggregate FTSE 100 pre-tax profit forecasts rose sharply in the first half of 2022, from £236 billion to £271 billion, only to then tumble back to £226 billion, as oil and metal prices subsided, input costs rose and financial companies cleaned house and marked assets to market.”
With that in mind, here’s a list of the companies with the ten highest dividend yields in the blue-chip index.
The highest dividend yields in the FTSE 100
|Company||Dividend per share for 2023*||Dividend per share for 2024*||2023 dividend yield (%)||2023 p/e*|
|M&G (LSE: MNG)||20p||20.5p||10.6||10.2|
|Phoenix Group (LSE: PHNX)||52.5p||54p||9.9||6.9|
|Vodafone (LSE: VOD)||8.2c||8.1c||9.6||9.9|
|British American Tobacco (LSE: BATS)||242p||255p||9.2||6.8|
|Legal & General (LSE: LGEN)||20.3p||21.3p||9.1||6.8|
|Taylor Wimpey (LSE: TW)||9.2p||9.4p||9.0||11.5|
|Aviva (LSE: AV)||33.5p||36.5p||8.6||7.2|
|Glencore (LSE: GLEN)||48.9p||44.3p||8.4||7.6|
|Imperial Brands (LSE: IMB)||145p||152p||8.2||6.3|
|Barratt Developments (LSE: BDEV)||33.2p||24.3p||8.0||6.2|
|Row 11 - Cell 0||Row 11 - Cell 1||Row 11 - Cell 2||Row 11 - Cell 3||Row 11 - Cell 4|
*Refinitiv broker estimates
Can investors trust these companies to deliver?
This list of the top-income stocks in the FTSE 100 has changed notably over the past few months.
It used to be dominated by homebuilders, but analysts have dropped their dividend estimates for these companies sharply as the outlook for the UK housing market has deteriorated.
The insurers Phoenix Group and Legal & General as well as the miner Glencore are the only stocks that have maintained a consistent presence on the list over the past six months.
I think all three of these companies look attractive from an income perspective.
Phoenix and Legal, along with Aviva, will be able to capitalise on the ever-growing demand for pensions and financial services in the UK. In these markets size matters as the biggest players can keep costs low (and profits high) freeing up more cash for their investors. Considering this growth potential, I’d back both FTSE 100 firms.
Glencore is the world’s largest commodity trader – it’s primed to profit from the global commodities boom that’s underway, powered by years of underinvestment in the sector.
When it comes to other businesses on the list, Vodafone’s dividend is looking increasingly shaky as the company struggles to both reduce debt and invest for growth. Meanwhile, both British American Tobacco and Imperial Brands are suffering as the number of smokers worldwide continues to decline, hitting their top and bottom lines.
Natwest is going to benefit from higher interest rates, which could boost the firm’s bottom line. If the economy is tipped into a recession due to the Bank of England's war against inflation, it could see rising loan losses. Still, it’s one of the few stocks on the list above with a favourable tailwind behind it during this highly uncertain time.
More on investing:
The author owns shares in British American Tobacco.
Rupert is the Deputy Digital Editor of MoneyWeek. He has been an active investor since leaving school and has always been fascinated by the world of business and investing.
His style has been heavily influenced by US investors Warren Buffett and Philip Carret. He is always looking for high-quality growth opportunities trading at a reasonable price, preferring cash generative businesses with strong balance sheets over blue-sky growth stocks.
Rupert was a freelance financial journalist for 10 years before moving to MoneyWeek, writing for several UK and international publications aimed at a range of readers, from the first timer to experienced high net wealth individuals and fund managers. During this time he had developed a deep understanding of the financial markets and the factors that influence them.
He has written for the Motley Fool, Gurufocus and ValueWalk among others. Rupert has also founded and managed several businesses, including New York-based hedge fund newsletter, Hidden Value Stocks, written over 20 ebooks and appeared as an expert commentator on the BBC World Service.
He has achieved the CFA UK Certificate in Investment Management, Chartered Institute for Securities & Investment Investment Advice Diploma and Chartered Institute for Securities & Investment Private Client Investment Advice & Management (PCIAM) qualification.
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