July 2, 2022

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AJ Bell: FTSE dividends set to have second best year ever

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New data from AJ Bell revealed that along with the £32.7bn in share buybacks already announced, the firm expects £81.2bn in dividends by the end of the year, as the FTSE 100’s net profits are now expected to hit a record high of £169.7bn in 2022.

However, these estimates even leave nine months of room for additional dividend increases, special dividends and share buybacks to be announced (of which there were £5.8 billion in 2021).

Rio Tinto is set to be the index’s single biggest dividend payer this year with £7.4bn, while Persimmon is expected to be the highest-yielding stock at 11.2%.

However, “investors will have to look carefully at the list of the highest-yielding firms, as some of them have a track record of having to cut their dividend payments when times get tough,” warned Russ Mould, investment director at AJ Bell.

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In total, 97 FTSE 100 firms are expected to pay a dividend in 2022, compared to 91 in 2021 and 85 in 2020. Dividend cover for the index is expected to exceed 2.0 times for the first time since 2013.

Meanwhile, 29 FTSE 100 firms have announced share buybacks for this year, as companies lean more towards the method when it comes to returning cash to shareholders, according to Mould.

Mould noted that “halting a buyback is a lot easier, and less likely to attract criticism, than cutting a dividend,” but stated that this was not a sign of limited corporate confidence, as firms had already announced more buybacks in the first three months of this year than the whole of 2021.

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29 FTSE 100 firms have already announced share buybacks this year, meaning the index was close to exceeding the record high of £34.9bn in 2018.

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