The FTSE100 seems to be going nowhere.
The UK index of blue-chip companies is no higher than it was 12 months ago, or, it should be noted, where it was six years ago.
Yet the index could still appeal to patient income investors, given a forecast dividend yield of 3.9% for 2023 and 4.2% for this year, according to stockbroker AJ Bell.
Although an inflation rate of 4.6% and a 10-year gilt paying 4% means those numbers do suffer a dint. The dividend forecast for last year is based upon estimates for a 3.8% increase in total dividend payments to £77.8bn.
An anticipated 9.5% increase in pre-tax income to a record £250.7bn offers support to those assumptions.
But the underlying net profit is expected to drop across the FTSE100 by 13.5% to £168bn, thanks in part to higher taxes.
That will not help dividend growth, and although analysts are looking for an 8.6% rebound in adjusted net profit this year that would still leave earnings below 2022’s peak.
This is understandably influencing boardrooms when they ponder what is the correct amount of cash to return to shareholders.
The forecast of £77.8bn in ordinary dividends is 9% below 2018’s record £85.2bn pay out, to reflect a combination of factors: the aftermath of Brexit, Covid, the return of inflation, higher taxes, increased wages and a surge in interest rates.
Interestingly, analysts have even shaved £900m o their aggregate dividend payment forecast for 2023, and sliced £1bn off 2024’s projections, in the past three months alone.
Nevertheless, analysts are still expecting an all-time high for aggregate FTSE100 pre-tax profits in 2023, at £250.7bn, which represents a 9.5% increase on 2022’s outcome and a huge improvement on the previous peak of £195bn in 2018.
However, that forecast has slipped by nearly 10% from £275.5bn during the past 12 months, as estimates for the banks, miners and oils have been trimmed back to varying degrees.
Estimates for 2024 continue to drop as well, although consensus forecasts now expect the FTSE100 to eke out a 3% improvement in pre-tax income next year to what would be a new record of £258bn.
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