Highlights
- FTSE 100 index is set to deliver a dividend yield of 4.1 per cent in 2021
- This is the first time the index will see dividend growth since the beginning of the pandemic
Dividends of FTSE 100 index constituents are expected to be back to their pre-pandemic levels, with the blue-chip index forecast to have a dividend yield of 4.1 per cent in 2021.
The index’s total dividend pay-out is expected to reach £84.1 billion in 2021, up by 36 per cent from £61.8 billion in 2020, according to the online investment platform AJ Bell’s most recent Dividend Monitor report. This is the first time the index will see dividend growth since 2018.
Most importantly, the growth is expected to come primarily from 10 stocks in the index, with mostly mining companies contributing to the index’s dividend growth.
The report also found that roughly five or six companies would contribute to the index’s dividend growth in 2021 and only 2 companies in 2022. However, concerns of stagflation could be a potential downside risk to dividends.
Let us take a look at 2 dividends paying FTSE 100 index stocks and their investment prospects:
- Vodafone Group PLC (LON: VOD)
Vodafone is a British multinational telecom giant. The group recently stated its goal of connecting 3.4 billion people to the internet via smartphones by 2030. The goal will be carried out in collaboration with ITU, a UN agency specializing in ICT.
According to AJ Bell’s Q3 2021 Dividend Monitor, Vodafone is forecasted to have a dividend payout of £2,152 million, a dividend yield of 6.3 per cent and a dividend cover ratio multiple of 0.89 in 2021.
The company’s shares closed at GBX 109.44, down by 0.91 per cent on 18 October 2021, while the FTSE 100 index ended at 7,203.83, down by 0.42 per cent.
The company’s market cap stands at £30,066.10 million, and it has a one-year return of 0.07 per cent as of 18 October 2021.
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- Evraz PLC (LON: EVR)
Evraz is a UK based multinational vertically integrated steel and mining company.
The company recently agreed to a sustainability linked loan of US$ 150 million, which is expected to mature in Q2 2026.
The loan’s interest rate will be dependent on Evraz’s performance on its ESG management score on Sustainalytics, ESG ratings, research and analytics firm.
According to AJ Bell’s Q3 2021 Dividend Monitor, Evraz is forecasted to have a dividend payout of £1,560 million, dividend yield of 17.9 per cent and dividend cover ratio of a multiple of 1.33 in 2021.
The company’s shares closed at GBX 629.20 on 18 October 2021. The company’s market cap stands at £9,183.91 million, and it has a one-year return of 74.36 per cent as of 18 October 2021.
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