We can’t spend share prices on a chart. But dividend cash is real money, and it goes straight in our pockets. UK dividend shares have had a few ups and downs in recent years.
But the UK stock market must be one of the best long-term cash generators ever.
And right now, while a lot of share prices are depressed, I think we could be looking at one of the best times to start buying dividend shares in ages.
Dividend payouts from FTSE 100 stocks have been soaring. In 2018, companies in the top index paid out a whopping £85.2bn in total.
That stumbled when companies cut their 2019 dividends in response to the pandemic. But some were forced to, by regulators. And with hindsight, it probably wasn’t necessary.
New record?
And now, according to AJ Bell‘s Dividend Dashboard, dividend forecasts for 2022 have already reached £85bn. That’s only a shade short of the record. And there has to be a good chance of beating it by the end of the year.
Forecasts put the overall FTSE 100 dividend yield at 4.2% now, which is good. But there are some cracking individual yields on offer too.
FTSE 100
Barclays and Lloyds, two of the banks forced to suspend their dividends in the pandemic, are both on forecast yields of around 5% now. Both should be very well covered by earnings, suggesting potential for progressive rises in future years.
One of my long-term favourites, National Grid, is on a predicted 2022 dividend yield of close to 4%. With its clear revenue outlook, I rate it as one of the most reliable.
The market has punished housebuilder share prices. But dividend yields are up as a result. Including a special dividend for returning excess capital, Persimmon‘s total forecast stands at 12%. And Taylor Wimpey is on 8%.
FTSE 250
The FTSE 250 is home to some tempting dividend shares too. And it’s not just the same old sectors of finance, housing and energy.
Synthomer, for example, has cut its interim dividend by more than 50%. That was inevitable, after the demand for its latex gloves during the pandemic fell back. But even adjusting for that suggests a full-year yield of 6.7%.
Computer services firm Micro Focus International has a predicted yield of 6%. And Royal Mail‘s is up to 8%.
Forecasts
These are only forecasts, and might not prove accurate. And they vary from source to source. They often only go on published figures too, and ignore things that we know are likely to happen.
It was fairly clear that mining dividends would be lower this year. But some sources stuck to their huge forecasts until interim dividend cuts were confirmed.
But generally, at least when aggregated to provide general trends, I’ve always found dividend forecasts a useful guide.
Outlook
We also face a pretty severe economic outlook. And we really don’t know what pressure dividends might suffer in the next 12 months.
So might 2022 turn out to one of the best years to start investing in dividend shares ever? Looking back over the past decade, I can’t see a better one.