FTSE 100 set for record cash returns to investors but dividend forecasts stall

2022 could become the best year ever for cash returns from the FTSE 100: £81.5 billion in forecast ordinary dividends; plus £1.6 billion in special dividends; and a record £50.3 billion in buybacks that have already been announced.

However, 2022 aggregate dividend forecasts are stalling amid recession fears, rising interest rates and weakness in metals prices impacting miners.

At £81.5 billion, dividends in 2022 are now expected to marginally undershoot the record payment of £85.1 billion in 2018.

FTSE 100 members forecast to increase ordinary dividend payments by 11% in 2022, although this figure is expected to slow to 8% in 2023.

Russ Mould, AJ Bell investment director, comments: “The FTSE 100 is now expected to yield 4.1% in 2022, as both the headline index and analysts’ dividend forecasts struggle to make any notable progress. The index’s total dividend pay-out is expected to reach £81.5 billion in 2022, compared to £78.5 billion in 2021, excluding special dividends.

“Total payments peaked at £85.2 billion in 2018 and 2022 is flagging in its efforts to get closer to that mark, as analysts’ estimates for total payments lose ground. Concerns over increases in input costs, interest rates (and therefore the cost of capital) and a possible recession are all factors weighing on 2022, especially as metals prices are, in many cases, lower than earlier in the year.

“However, ongoing strength in oil and gas prices is giving support to estimates for 2023, for which analysts are still nudging up their dividend payment forecasts.

“Analysts expect 2023 to 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 4% in 2023, while ordinary dividends are seen rising by 8% to £87.7 billion. This may reflect the additional room for manoeuvre offered by 2022’s forecast dividend cover of 2.36 times, the best figure since 2012.

“The lofty dividend cover ratio may also be the result of how more than one third of the FTSE 100’s members are running share buyback programmes as a means of returning cash to their shareholders.

“The aggregate total forecast for dividends, special dividends and share buybacks now totals £133.4bn for 2022, meaning it should surpass the £126.8bn combined figure achieved in 2018.”