With inflation topping 9%, and bear markets in the US, the outlook for UK dividend shares must surely be taking a hit? Well, nobody seems to have told the City’s analysts. Today I’m looking at three dividend forecasts that are bullish all the way to 2024.
Forecasters are often slow to react, and they often get it wrong. So I wouldn’t invest solely on forecasts. But they do offer some insights, and they can help us shape our own thoughts.
It’s a banker
The Lloyds Banking Group (LSE: LLOY) share price has fallen 12% over 12 months. On today’s price, last year’s dividend would yield 4.8%.
But dividend forecasts suggest a rise this year, which could lift the yield close to 5.5%. And they have it reaching 6.5% by 2024.
Is there any evidence to support this? When announcing last year’s dividend, the bank spoke of its “progressive and sustainable ordinary dividend policy.” It also revealed a new share buyback, returning more surplus capital.
More recently, in Q1 this year Lloyds enjoyed a 26% increase in underlying profit before impairments. And rising interest rates are boosting its net interest margin.
Yet we did see £200m in impairments, largely as a result of the gloomy economic outlook. And any kind of prolonged recession could damage Lloyds’ prospects. But right now, especially with share buybacks still going, I think I’m seeing enough cash to support those dividend forecasts.
Long-term safety?
Taylor Wimpey (LSE: TW) is one of the FTSE 100‘s top housebuilders, and its dividend forecasts are looking very good.
Investors could bag a very nice 8% dividend yield this year. And it could even exceed 10% by 2024. Those yields are helped by the share price falling 29% in a year. But forecast growth is positive.
Rising interest rates are good for banks that make money lending, but they’re not so good for homeowners paying mortgages. That’s the big threat facing Taylor Wimpey. Yet so far, the market is still seeing solid demand and growing order books.
There’s surely some pent-up demand from the pandemic years still unfolding. Whether it will keep the market going until inflation settles down is a big unknown. But this is another dividend forecast that I rate highly for long-term investors.
A dead industry?
The forecast BP (LSE: BP) dividend yield isn’t massive, at just 5%. And a 22% share price rise over 12 months has pushed it down. But I see potential, for a few reasons.
Warren Buffett has recently upped his stake in the oil and gas sector, so he clearly sees a decent future. And which companies have the financial muscle and technological expertise to move into renewable energy on a large scale? The current big energy suppliers.
The BP share price is currently supported by high oil prices. But they’re already slipping back. And this time next year I suspect a barrel will cost a good bit less than $100. If that happens, I’d expect BP shares to fall back.
Meanwhile, analysts predict a 2024 dividend yield rising close to 5.5%. So would I buy BP shares? Not now, but I may do if we see any future dips.