Paying dividends: the FTSE stocks most likely to pay out in 2021

FULL LIST: The 44 FTSE 100 companies “extremely likely” to pay dividends in 2021

Today’s $1billion profit announcement by Royal Dutch Shell and its accompanying pledge to up its divis - slashed in April for the first time since the 1940s - landed like manna on cash-starved investors, sending shares up by almost 5% in early trading.

It follows a similarly confident return to the black for rival BP, while across the sectors Lloyds, Next, Bloomsbury, Pearson, GSK and HSBC also beat City expectations this week despite the pandemic’s looming second wave and the US election weighing down on markets in Europe and overseas.

Edinburgh-based aviation services specialist John Menzies became the first company to suspend its dividend as the pandemic hit UK shores early in March. Within weeks 47 FTSE 100s companies had followed suit reducing, suspending or cancelling payouts and at least 100 firms in the FTSE250 did the same in an unprecedented battening down of the corporate hatches.

Banks also agreed, under duress from the government and regulators, to suspend payouts and scrap bonuses in order to preserve their capital buffers.

Today’s report suggests that the rate of cancelled and cuts to dividends has been gradually arrested over the past few months, with year-to-date total payments now at £36billion across the indices, up from £33.5bn in July against an expected annual average of around £70bn.  

Among companies now considered by Peel Hunt “extremely likely” to pay in the FTSE 100 - where mining, consumer and healthcare sectors are thought the safest bets - are:

- Legal & General (with 6.6% due by June)

- Rio Tinto (4.2% by April) and PolyMetal (3.9% by May),

- Phoenix (3.5% by May).  

Standouts in the FTSE250 include car insurers Sabre (with 5.0% due in May), and financial planners Brewin Dolphin (4.9% in Feb).

Those considered “likely” to issue divis in the FTSE100 include:

- M&G (7.2% due in May)

- Aviva (6.9% by May)

- Standard Life Aberdeen (6.1% by May)

In the FTSE250, it highlights Jupiter (3.9% in April) and Electrocomponents (3.6% in January)

Any return to payments cannot come too soon for ordinary savers and pension firms in particular, where dividends and dividend growth play a critical role in achieving sustainable income and long-term returns at a time when interest rates are near zero and falling.

Fidelity International has calculated that after the cuts in dividend payments this year, the yield on the FTSE 100 will average around 4% in the year ahead. AJ Bell pegged the overall yield for the past 12 months on the FTSE100 at 4.7%, against 2.3% on the Dow Jones in the US.  

And the assessment could give fresh impetus to calls from City heavyweights for regulators to release banks and insurance firms from the pandemic restrictions.

Laith Khalaf, a financial analyst at AJ Bell, said: “UK equity is still very popular as a place for people to hold their money and, particularly since the pension freedoms were brought in, a lot of people’s pensions are in UK stock market funds which are used to generate incomes for their retirement.  

“While the pandemic has been bad for young people, financially speaking these older investors have been hit hard too, and they don’t have the time to make that money up though earnings.

“Cutting dividends isn’t new to the pandemic, but it has certainly happened on the broadest scale I’ve seen before with scalps like Shell cutting payments, something that didn’t happen even with the financial crisis... a Shell dividend cut was almost unthinkable.

“But if you look at the FTSE now a lot of pain is already in the price, and a lot of the dividend cuts are priced in, so looking forward the yield on the FTSE for new money going in is pretty good.  

“British companies particularly know how much people rely on dividends, which is in contrast to the US where there is more focus on reinvestment in growth and share buybacks.

“UK equity is a good market for income seekers and will be good again, but it clearly needs to rebuild from the low base it’s at at the moment.”