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Income Majors 2021

We examine the outlook for the FTSE 100's biggest dividend payers
August 26, 2021

The dividends are coming home. Last year was tough for the UK’s legion of income investors after Covid-19 prompted many of the country’s most reliable dividend payers to slash shareholder payouts.

But now the dividend giants are loosening their purse strings once again. From Royal Dutch Shell (RDSB) to Lloyds Banking Group (LLOY), businesses across a number of hard-hit sectors are gathering their spare change and starting to return more of it to shareholders. 

According to data provider Link, the reopening of the economy in the second quarter has come alongside a huge rebound in dividends, with the total paid by UK companies jumping 51 per cent year on year to £25.7bn. AJ Bell is now forecasting that the collective payout by FTSE 100 businesses this year will exceed the total in 2019 as blue-chips unleash the cash they saved by cancelling dividends in 2020.

 

 

In a country hampered for years by stagnant market growth and a shortage of high-flying tech start-ups, this will put a smile on the faces of those investors who have come to depend on at least one thing from London-listed companies: some of the world’s most generous dividends.

In light of this brightening outlook, our annual feature on the UK’s top income stocks is now making a comeback after a hiatus during the Covid payment drought. As before, our writers have taken a deep dive into the dividend policies of some of the UK’s biggest payers, picking out a couple from each of the major dividend-paying sectors.

But given the anomaly of the past year, this time we are placing a greater emphasis on our future expectations for these dividend payers, highlighting the stock we think represents the best forward-looking investment case in each industry.

As they reinstate their dividends, many of these companies are already receiving a small stock market boost: immediately following their announcements, shares in Shell and Lloyds jumped 5 per cent and 2 per cent, respectively. Nonetheless, global market-watchers will point out that these short-term leaps are dwarfed by the continuous growth enjoyed throughout the pandemic by many leading stocks in the US, where shareholder payouts are relatively low even in a normal year.

As thousands of Brits hail the return of dividends, others will question if UK companies would be better off spending that money on share buybacks or research and development.

Whether you have built a dividend-focused portfolio, or plan to reinvest these top-ups in more shares, it is key to know the outlook for the main players in the UK market. As we emerge from one of the longest dividend droughts on record, a review of the UK’s Income Majors has never been more pertinent. Oliver Telling

 

TIDMNameTrailing yield (%)Forecast yield (%)Market cap (£m)Total divis paid 2020 (£m)Total divis paid 2019 (£m)Total divis paid 2018 (£m)Buybacks 2020 (£m)Forecast buybacks (£m)
AZNAstraZeneca2.82.4135,253.32,785.52,815.62,612.9-4,746.6
RDSBRoyal Dutch Shell 'B'3.94.4108,272.65,789.411,913.111,755.61,625.12,205.3
GSKGlaxoSmithKline6.05.276,250.63,977.03,953.03,927.0-12.5
RIORio Tinto6.216.365,214.04,781.88,100.44,016.8162.2-
BATSBritish American Tobacco8.08.062,218.94,745.04,598.04,347.018.0-
BP.BP7.95.658,001.64,944.05,444.75,024.0680.8641.7
BHPBHP10.710.546,117.15,873.05,461.38,804.5173.949.0
VODVodafone5.96.433,969.12,165.72,008.73,584.155.3990.5
LLOYLloyds Banking1.65.031,219.90.02,312.02,240.0-1,500.0
BARCBarclays0.73.530,385.5936.01,912.01,658.01,413.01,650.0
BT.ABT0.04.417,198.42.01,520.01,504.014.056.3
AV.Aviva8.35.216,230.4253.01,201.01,145.02.0750.0
LGENLegal & General6.66.915,671.01,048.0998.0932.023.0-
IMBImperial Brands10.19.014,735.61,753.01,844.01,676.092.0-
PHNXPhoenix6.87.86,236.3403.0338.0262.0--
Source: FactSet, as of 23 August 2021. Mean forecasts based on broker consensus.     

 

AstraZeneca payout looks well-protected

Shell remains cautious, even as returns rebound

BHP: more bang for your buck

Tobacco cheers income investors

Vodafone dividend faces capital competition

Lloyds offers chug-along income

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