Trying to predict dividend income isn’t easy. However, when trying to plan for the next couple of years, an investor could consider dividend forecasts and use this as part of their overall decision-making process. When looking for dividend shares with potential, here are two to think about that could offer generous yields in the years to come.
Public sector cash flow
The first one is International Public Partnerships (LSE:INPP). The UK-listed infrastructure investment company focuses on acquiring and managing a portfolio of assets. This mainly revolves around public-private partnership projects, such as renewable energy initaitives.
The reason why investors might like this as a company is because the assets are typically backed by long-term, government-supported contracts. This means that the revenue generated by the company can be seen as stable and predictable. It therefore translates to good cash flow, which in turn allows the dividend to be paid.
For the past decade, the dividend has been ticking higher each year, being paid semi-annually. It has a policy of increasing it by 2.5% each year. At the moment the yield is 7.22%. Assuming that the 2.5% increase keeps occurring and we don’t see any crazy share price movements, the yield should remain above this level.
The share price is down by 11% over the last year. One reason for this is the “volatile macroeconomic environment” that was spoken about in the interim financial report. With inflation starting to rise again and uncertainty about interest rate movements, this is a risk going forward.
The future of energy
Another income stock is the Foresight Solar Fund (LSE:FSFL). I wrote about the company earlier in the month, flagging up the potential for a bumper yield going forward.
At the moment the dividend yield is 10.84%. Usually investors get paid a dividend each quarter, with the amount increasing once a year. According to analyst expectations, the upcoming June declared dividend could rise to 2.1p per share (from the current 2p level). In June 2026, this is expected to rise to 2.19p, with June 2027 at 2.27p.
The factor that fuels this increase is similar to International Public Partnerships. It makes money from owning and managing a portfolio of solar energy assets. It has power purchase agreements (PPA) with suppliers, which mean the revenue is quite certain based on the contracts. Further, being in the renewable energy sector should mean long-term success, given that this is seen by many as the future of fuelling the globe.
However, operating in the energy space does have risk. The 26% fall in the share price over the past year can partly be attributed to lower power prices. This has a direct negative impact on revenue.
Both shares could offer an investor income in the coming few years. Of course, this isn’t a guarantee, but is something to consider.
This post was originally published on Motley Fool
