Dividend growth set to slow in 2022

AJ Bell’s latest Dividend Dashboard report shows:

• Dividend growth is set to slow in 2022 after a strong bounce back in 2021
• Glencore is forecast to be the FTSE 100’s biggest dividend grower in 2022
• Rio Tinto is forecast to be the index’s biggest dividend payer in 2022 despite cutting its payout
• Twelve FTSE 100 firms are currently forecast to offer a yield of more than 7% in 2022, with Evraz topping the list with a forecast dividend yield of over 17%
• Dividend cover is forecast to improve to 1.95x next year
• 16 FTSE 100 firms have grown their dividend every year for the past 10 years – down from 24 just a year ago

Russ Mould, investment director at AJ Bell, comments:

“The FTSE 100 is currently expected to yield 4.1% in 2022, helped by the second annual increase in a row after 2020’s sharp decline. The index’s total dividend pay-out, excluding special dividends, is expected to reach £81.8 billion in 2021, a 32% increase compared to £61.8 billion in 2020. Growth then slows considerable into 2022 with total dividend payments forecast to come in at £83.7 billion, an increase of just £1.9 billion or 2%.

“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.”

Source: Company accounts, Marketscreener, analysts’ consensus forecasts

Top dividend growers and cutters for 2022 

“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.”

Source: Company accounts, Marketscreener, consensus analysts’ forecasts