Interactive Investor

These 8 FTSE 100 shares will generate £8bn dividend windfall in April

30th March 2023 11:35

by Lee Wild from interactive investor

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Nothing is certain these days, but despite everything that’s going on there are plenty of solid companies paying very attractive dividends.

Dividend windfall 600

Some of the country’s biggest companies reward shareholders for their loyalty in April to the tune of over £8 billion. That provides a huge boost at a time when investors are unable to rely on capital growth, and with the World Bank predicting a decline in the global economy's long-term growth potential leading to a ‘lost decade’.

The latest UK dividend bonanza will take total dividend payouts featured in this and our two other monthly articles in the series this year to a staggering £20 billion.

Of the £8.7 billion to be paid by the eight FTSE 100 companies in the month ahead, four of the UK’s 10 largest companies are responsible for £7.3 billion of it. HSBC Holdings (LSE:HSBA), the £108 billion banking business and FTSE 100’s third-largest constituent behind AstraZeneca (LSE:AZN) and Shell (LSE:SHEL), is the most generous of them. A final dividend of 23 US cents - roughly 18.7p - is worth $4.6 billion, or £3.7 billion.

And the City thinks the lender’s attractive payout policy is sustainable. HSBC’s dividend payout ratio in 2022 was between 40% and 55% of reported earnings per ordinary share, and it’s already flagged a ratio of 50% for both 2023 and 2024.

Despite sending shareholders dividend cheques worth £2.3 billion on 20 April, London’s sixth-largest blue-chip Rio Tinto (LSE:RIO) is only second place in the monthly dividend table. A final dividend for 2022 of 185.35p per share, which traded ex-dividend on 9 March, is equivalent to £2.3 billion.

While shareholders will be disappointed at the lack of any special payout this year, the double-digit yield enjoyed until recently was never sustainable.

The mining sector is a good example of how quickly the wind can change. Companies prospered and had enough spare cash to pay massive special dividends to shareholders for a few years. But declines in the price of iron ore and copper at the end of last year reduced profits, and many miners plan to increase capital expenditure. Some analysts also predict flat demand for iron ore this year.

However, Rio expects total cash returns to be in a range of 40-60% of underlying earnings in aggregate through the cycle. Chief executive Jakob Stausholm said at February's annual results: "We will be able to continue to pay attractive dividends and invest in sustaining and growing our portfolio.” And even after a reduced payout, Rio shares still currently yield 6.8%.

Company

Payment date

Forecast dividend yield (%)

Dividend payment (£m)

Land Securities Group (LSE:LAND)

06-Apr

6.6

67

GSK (LSE:GSK)

13-Apr

3.9

563

Diageo (LSE:DGE)

13-Apr

2.3

696

Rio Tinto (LSE:RIO)

20-Apr

6.8

2,318

Haleon (LSE:HLN)

27-Apr

1.8

222

HSBC (LSE:HSBA)*

27-Apr

8.6

3,727

M&G (LSE:MNG)

27-Apr

11.1

316

Anglo American (LSE:AAL)*

28-Apr

5.5

803

Source: SharePad on 28 March 2023. *Paid in dollars (conversion to sterling on 28 March 2023)

Anglo American (LSE:AAL), the £34 billion mining company, kept its dividend payout ratio at 40% of profits when it published annual results in February. Profit was down sharply whichever way you present the numbers, but fell 30% on an underlying basis. So the De Beers owner cut its final dividend to $0.74 per share, which compares with a $1.18 ordinary dividend and $0.50 special divi paid the year before.

There’s another big payout coming from Diageo (LSE:DGE). The Guinness brewer, who will soon wave goodbye to long-serving CEO Ivan Menezes, has announced an interim dividend of 30.83p per share. You’re entitled to the money if you bought the shares before 2 March and still owned on that day.

GSK (LSE:GSK) and Haleon (LSE:HLN) are paying a combined £785 million in the next few weeks. GSK, which de-merged its consumer healthcare business in July last year, returns the lion’s share and is the higher yielding of the two by some way.

It has committed to a dividend payout ratio of 40-60% through the investment cycle and expects to return 56.5p to shareholders via dividends in 2023. Haleon, whose share price has recovered strongly after a poor start to life without GSK, is paying a 2.4p per share dividend this time, equivalent to about 30% of adjusted earnings for the period since listing.

Both companies remain favourites among ISA millionaires on the interactive investor website. GSK is the fourth most-held instrument by number of customer holdings and Haleon fifth.

The real estate investment trusts sector is among the worst performers in 2023 so far, down 5.8%, following a disastrous 2022 when it lost 35.6% of its value. Land Securities Group (LSE:LAND), with declines of 20% and 4.7% respectively, has outperformed many peers including British Land (LSE:BLND) but remains vulnerable.

Still, it is generating income, and the third interim dividend of its financial year of 9p a share takes the total so far to 26.6p. There’s one more payout to come for the year ending 31 March 2023, usually in July.

In terms of yield I’ve saved the best till last. M&G (LSE:MNG) has raised eyebrows with stellar dividends for some time, and now there’s added speculative interest amid talk that Australian investment bank Macquarie (ASX:MQG) is mulling a bid for the UK company.

With a lot of hot air having left the share price since rumours first surfaced, the final dividend of 13.4p a share makes a total payout of 19.6p for 2022. That’s up 7% on the year before and gives a yield of 11%, despite a £28 billion decline in assets under management last year and 27% slump in operating profit.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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