FTSE 100 (^FTSE) dividends are set to rebound 18% in 2021 after the coronavirus pandemic wiped £14.7bn ($19.6bn) worth of payments this year.
According to online investment platform AJ Bell (AJB.L), blue-chip dividends are forecast to increase £10.9bn to £70.8bn next year.
Each quarter AJ Bell takes the forecasts for the FTSE 100 companies from all the leading city analysts and aggregates them to provide the dividend outlook for each company.
Market newcomer M&G (MNG.L), Imperial Brands (IMB.L), British American Tobacco (BATS.L) and Polymetal (POLY.L) are tipped to be the highest yielding stocks in 2021, while HSBC (HSBA.L), Lloyds (LLOY.L), Glencore (GLEN.L) and BT (BT-A.L) are forecast to deliver the highest dividend increases at the time of writing.
HSBC’s dividend increase is expected to come in at £3.3bn, a 30.4% increase as a percentage of the FTSE total. Earlier this month, UK banks were given the green light to restart payouts to shareholders, although the size of dividends and buybacks has been capped for now.
The Bank of England said in a statement that it had decided banks could resume dividends and other capital distributions after assessing the strength of the sector.
Payouts were banned in March amid concerns that banks could run low of capital as the COVID-19 crisis battered the economy.
Russ Mould, investment director at AJ Bell, said: “There is no doubt that 2020 has been tough on income seekers. In total, 53 current or former members of the FTSE 100 index have cut, deferred or cancelled over £37bn of dividend payments in calendar 2020 thanks to the COVID-19 outbreak and subsequent recession.
“Yet the news flow is starting to improve. Fifteen FTSE 100 firms have either returned or declared their intention to return to the dividend list for fiscal 2020.”
He added: “A sixteenth [FTSE company] – BT – has outlined plans to pay a dividend in 2021. The total dividend payments made or announced by those sixteen add up to £2.7bn with four yet to finalise the actual figure. That £2.7bn figure is still dwarfed by the value of the cuts announced in calendar 2020 but it nevertheless underpins the improved momentum in overall FTSE 100 dividend forecasts.”
As dividend payments are forecast to drop by 20% in 2020, this puts the FTSE 100 on an expected dividend yield of 3.2% for this year and 3.8% for 2021.
“It is the latter number which may be more relevant as investors, encouraged by the development and imminent roll-out of several vaccines for COVID-19, attempt to look beyond the pandemic,” said Mould.
WATCH: Should I pay off debt or save money during the coronavirus pandemic?