With all the negativity and belt-tightening going on these days, we might expect pressure on the FTSE’s dividend shares. But there are some great yields and big share buybacks from UK’s biggest companies out there.
In fact, 2022 looks like it could challenge 2018 for the FTSE 100‘s best dividend year ever. Forecasts suggest a massive £81.5bn in ordinary dividends this year.
Averaging several sources, here’s what appear to be the 10 biggest forecast dividend yields in the FTSE 100 this year. Forecasts vary, so you’ll find slightly different lists elsewhere.
| Company | Recent price |
12-month change |
Forecast P/E |
Forecast yield |
Forecast cover |
| Persimmon | 1,329p | -50% | 5.4 | 18% | 1.1x |
| M&G | 180p | -10% | -5.3 | 11% | 1.0x |
| Rio Tinto | 4,670p | +2.5% | 6.4 | 10% | 1.7x |
| Barratt Developments | 380p | -43% | 6.7 | 9.9% | 1.4x |
| Taylor Wimpey | 97p | -37% | 5.4 | 9.7% | 2.0x |
| Phoenix Group | 544p | -18% | -7.8 | 9.1% | 0.5x |
| Vodafone | 99p | -12% | 14 | 7.9% | 1.0x |
| Intermediate Capital Group | 1,072p | -52% | 12 | 7.5% | 1.6x |
| Legal & General | 233p | -19% | 6.8 | 8.2% | 1.9x |
| Imperial Brands | 2,106p | +33% | 9.5 | 6.8% | 1.6x |
Tough 12 months
Most of these stocks have had a tough 12 months, with some pretty hefty share price falls. Whether that makes them good long-term dividend buys depends on the reasons behind the falls.
If it’s just negative market sentiment, buying after a fall can be very profitable. I think that’s especially true for dividend shares. As well as any possible share price recovery, we get to lock in that high dividend yield for as long as we hold the investment.
A couple of these have enjoyed gains over the past 12 months. Imperial Brands is the stand-out, up 33%. But I see that as a long overdue price correction, still leaving its price-to-earnings (P/E) multiple at just 9.5. Investors have shunned the tobacco industry for years, despite its strong cash-generative profits.
Sector domination
Another note is the way market sectors can dominate. There’s only one miner in the list now, Rio Tinto. But if I’d done this just three months ago, we’d have seen two or three more up there. Commodities demand has been falling, partly as a result of general global conditions, but also from the economic damage caused by China’s zero-Covid policy.
It doesn’t mean I wouldn’t buy a mining stock for long-term dividend income. But I’d be keenly aware that the sector can be very cyclical.
Housebuilders are up there, and it’s all about an expected weakening of the property market. Lloyds Banking Group has just predicted that house prices will fall 8% next year. But even with that, I think housebuilder shares are oversold. They can still make profits and generate cash even when prices are falling.
Careful with cover
I also see there’s a wide range of cover by earnings. That can be an indication of the likely progressive strength of a dividend in the coming years.
I haven’t looked at the individual risks with most of these stocks, and I’d definitely do that before I invested in any. But I think there’s attractive potential to put together a small portfolio of maybe four or five long-term dividend shares from this list.
