When we look for FTSE 100 dividend stocks to build up a lifetime of income, big dividend yields matter most, right?
Well, dividends are never guaranteed. A big yield right now can help offset the pain of cuts later though. But over the long term, steady progressive raises can make all the difference.
Oh, and cover by earnings is important too. A big yield today might not last long if the company isn’t bringing in the earnings to pay for it.
We should combine all these things to find the dividend stocks we want to buy now. And today, I’m looking at one aspect — forecast rises.
Best forecast?
If you had to guess at which FTSE 100 companies analysts think will lift their dividends by the biggest percentage in the next few years, what might you go for?
I’ll start with two that paid no dividends last year, Rolls-Royce Holdings and International Consolidated Airlines. Both have been through tough times due to the Covid impact on the aviation business.
Both share prices are down over five years, and both are expected to resume dividends this year, with solid growth set to follow.
It’s a bit early to make much sense of yields, which should still be modest. But they could be the start of something good.
Wobble to come?
Each has its own risks. For Rolls, I reckon the biggest danger might be a share price correction after the stock has soared.
And International Consolidated Airlines is in a volatile business, affected big-time by oil prices. The forward price-to-earnings (P/E) ratio is only about four though, which I think looks cheap.
But they’ve both paid decent dividends in the past, and that points to one thing to consider when we look for future cash. That’s finding companies that are returning to health.
Back to bricks
One of the biggest anticipated dividend rises, at least in total cash terms, can be found at Vistry Group (LSE: VTY), the housebuilder formerly known as Bovis Homes.
And for my money, that’s a business sector any dividend investor really should consider as a way to generate long-term income.
The share price has recovered well since 2022. But even with that, forecasters still put their expected 2024 yield at 3.6%. That would then rise to 5.4% in 2025, and 6.3% by 2026.
In fact, I like the look of pretty much all of the sector right now for cash generation. We see a predicted yield of 5.8% from Taylor Wimpey, and 5.1% from Barrett Developments, for example.
Cash cows
Vistry has also been on a share buyback spree, returning more capital to shareholders that way. We still face uncertainty while mortgage rates remain high though. So I might expect a bit of share price volatility to come.
Yet this sector shows another avenue through which I seek long-term dividends. If I look at a business and I’m convinced I see a cash cow that could deliver for decades to come, I’ll consider buying it even when others might see it as down and out. Especially then, in fact.
Just think of the effective yields investors who bought near the bottom would see today on the prices they paid back then.
The post Analysts expect big dividend jumps from these FTSE 100 stocks appeared first on The Motley Fool UK.
Pound coins for sale — 31 pence?
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Rolls-Royce Plc and Vistry Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
