AJ Bell: FTSE 100 dividends to rise 32% to £82bn

Salford-based investment giant AJ Bell said the FTSE 100’s total dividend pay-out, excluding special dividends, is expected to reach £81.8 billion in 2021, a 32% increases the £61.8 billion paid out 2020.

AJ Bell said however that FTSE 100 dividend growth will slow considerably in 2022 with pay-outs forecast to come in at £83.7 billion, an increase of just £1.9 billion or 2%.

AJ Bell’s “Dividend Dashboard” said: “A drop in industrial and precious metal prices, and particularly iron ore and copper, has weighed on forecasts from the all-important mining sector.

“An £11.1 billion increase in dividends from miners in 2021, excluding special payments, is expected to give way to a drop of £2.1 billion in 2022.

“It also remains to be seen whether companies start to lean more toward share buybacks when it comes to returning cash to shareholders, in light of the UK Government’s one-and-a-quarter percentage point increase in dividend taxes, or whether the pensions’ regulator’s threat to challenge dividend payments made by firms with pension deficits affects boardrooms’ dividend policies.

“Excluding Johnson Matthey and Darktrace, who have both tumbled out of the FTSE 100 index in December, shortly after announcing share buyback programmes, no fewer than 22 FTSE 100 members have announced buyback schemes in 2021, to the tune of £18.7 billion.

“Shell and Diageo have already made clear their intention to buy back more shares in 2022.

“For the moment, however, dividend payments are seen reaching £83.7 billion in 2022 and £84.8 billion in 2023.”

On the top dividend payers for 2022, AJ Bell said: “Meaty increases in dividends at Glencore, Shell, HSBC, Lloyds and the resumption of payments at Flutter Entertainment look set to just do enough to offset anticipated falls at Rio Tinto, GlaxoSmithKline (thanks to a change in corporate structure), Anglo American, Evraz and Antofagasta.

“This again highlights the importance of the miners to the overall direction of FTSE 100 profits and dividends, something which may also attract the attention of those investors who run strict ethical, social and governance (ESG) screens before they decide where to put their capital …

“Rio Tinto is expected to be the single biggest paying stock within the FTSE 100 in 2022 but Shell and British American Tobacco are not expected to be far behind it.

“This may have ESG-oriented investors gnashing their teeth, especially as they may argue both firms are acting too slowly in their attempts to shift their business mix to more renewable sources of energy.

“Shell and fellow oil major BP, also a top-ten dividend contributor, have a tricky balancing act as they look to get the best out of their existing assets, reinvest for the future (without overpaying here, amid the mad scramble for ‘green’ assets) and keeping shareholders sweet with cash returns.

“That said, Shell is starting to increase its dividend on a quarterly basis and both it and BP are also returning cash to investors via share buybacks.”

On “10-year dividend heroes” AJ Bell said: “The ravages of the pandemic and the recession have taken their toll on the ranks of FTSE 100 firms that can point to a ten-year dividend growth track record.

“One year ago, 24 firms were on this list.

“That number has since dwindled to 16 even as National Grid, United Utilities and Dechra Pharmaceuticals joined this elite grouping in 2021, the last-named by dint of its promotion to the index in December …”

About the Author

Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.