Today I am looking at banking coloussus Lloyds Banking Group’s (LSE: LLOY) (NYSE: LYG.US) dividend outlook past 2014.
Bank on blockbuster dividend growth
High-street banking institution Lloyds has not shelled out a dividend since 2008’s full-year payout of 11.4p, one of the consequences of the bank’s part-nationalisation following the global banking crisis. But City analysts believe that the firm is on the verge of shelling out shareholder payouts once more.
The company’s massive restructuring drive continues to deliver plump rewards, and October’s interims showed core underlying profit surge 20% during January-September, to £5.55bn. A more UK-centric bank is benefitting strongly from the recovery in the domestic economy, while vast cost-cutting initiatives and ongoing asset stripping continues to boost the firm’s earnings outlook.
Indeed, brokers predict Lloyds to bounce from losses per share of 2p per share in 2012 to earnings of 5.1p last year, results for which are due on Thursday, February 13. Further growth of 35% is expected in 2014, to 6.9p, with an additional 12% rise anticipated for 2015 to 7.8p. These stunning earnings prospects have raised speculation over dividend resumption in the very near future.
Indeed, Lloyds management “have now commenced discussions with the regulators regarding the timetable and conditions for future dividend payment,” the firm commented in its latest financial update. And analyst consensus points to a 0.51p final dividend per share for 2013.
Payments are expected to ratchet higher thereafter, according to the capital’s number crunchers, with a 371% increase in the full-year dividend expected this year alone, to 2.4p. And the 2015 dividend is expected to rise an additional 58% to 3.8p.
If realised, these payments would push a yield of 2.8% for this year to 4.5% in 2015, soaring above the current forward readout of 3.6% for the complete banking sector and corresponding readout of 3.1% for the FTSE 100.
Strong dividend coverage above the safety watermark of 2 times prospective earnings should bolster investor confidence over predicted payments through 2015, with a readouts of 2.9 times for 2014 and 2.1 times next year based on current projections.
In my opinion Lloyds is in fantastic shape to punch exceptional dividend growth in coming years. Although the bank is yet to receive the rubber stamp to start distributing dividends again, I expect strong full-year results next month to herald a resumption of the firm’s payout policy once more.