It’s some time since I’ve felt this bullish in regards to the dividend forecast for the UK inventory market.

The most recent Dividend Dashboard, from AJ Bell, exhibits an analyst consensus for a 1% rise in dividend money this 12 months. And there’s an additional 7% rise pencilled in for 2025, to succeed in £83.9bn.

That wouldn’t fairly get us to 2018’s all-time file of £85.2bn. However we’d miss by solely a whisker.

For the previous few years, analysts have began out with large hopes and pared them again a bit because the months move, although. However even with that, I nonetheless share the optimism.

Buyback enhance

A fast have a look at the primary couple of days of this week alone exhibits dozens of FTSE 100 corporations engaged in share buybacks.

Barclays and HSBC Holdings, BP and Shell, BAE Methods, Tesco, Prudential… they’re all doing it. It’s not only a few sectors, it’s throughout the board.

When such a various vary of corporations need to purchase their very own shares at right this moment’s costs, it makes me need to take part.

And buybacks ought to enhance future per-share dividends.

Dangerous large yields?

Let’s have a look at one of many greatest yields.

Financial savings and funding supervisor M&G (LSE: MNG) is forecast to pay a 9.7% dividend yield in 2024.

That’s not assured, as no dividend ever will be. However we’re inching nearer to the top of the 12 months, with no apparent issues to date. And that lifts my optimism.

With such an enormous yield, I’m often cautious. Will there be sufficient earnings to cowl it? What do the following few years seem like? Have we had cuts in recent times, and does future money look a bit weak?

These issues went mistaken for Vodafone, set to slash its 2025 dividend in half. For years, it simply wasn’t producing the money to provide me any confidence in its large dividends. And that’s lastly come again to chunk.

Future outlook

I haven’t determined whether or not I’d purchase M&G. However forecast earnings look comfortably forward of dividends, with cowl of round 1.35 instances. For this type of firm, which isn’t capital intensive, I feel that’s fantastic.

There’s been no dividend lower prior to now decade, and I see no purpose to concern one within the subsequent few years.

There may be particular danger, as M&G is popping out of a troublesome patch when folks pulled again on their use of funding companies. We’re not out of these woods but. And inflation continues to be a fear, holding folks’s fingers extra firmly of their pockets.

However throughout the FTSE 100, I’m seeing equally upbeat earnings expectations. Cowl is a bit skinny in some circumstances, but it surely usually seems to be sturdy to me.

As a basic warning, the Dividend Dashboard factors out that we’ve had 137 dividend cuts from right this moment’s FTSE 100 shares prior to now decade. Of these, 74 had been in 2019 and 2020 (and a few, just like the banks, shortly got here again).

Dividend investing isn’t a no-risk technique. However proper now, I do assume the potential reward-to-risk ratio from FTSE 100 dividends could be the most effective I’ve seen for a while.