The FTSE 100 is experiencing a significant boost in cash yield, driven by a combination of share buybacks and takeovers, despite forecasts indicating flat dividend growth for the upcoming years. According to AJ Bell's Dividend Dashboard, aggregate dividend forecasts for the FTSE 100 in 2024 are projected at £78.6 billion, reflecting a modest 1% growth, with expectations of a 7% increase to £83.9 billion in 2025. Notably, FTSE 100 firms have announced plans for £49.9 billion in share buybacks for 2024, following a record £52 billion in 2023 [acc4be39].
This trend of returning capital to shareholders is evident as 43 FTSE 100 companies have already announced buyback programs for 2024. The total cash returns from the FTSE 350 are expected to reach £189.7 billion, yielding an impressive 7.7%. However, there are concerns regarding concentration risk, as the top 10 companies are projected to account for 55% of total dividends paid [acc4be39].
In terms of profitability, pre-tax profits for FTSE 100 firms are forecasted at £237.3 billion for 2024, which marks a 4% decline from previous estimates. Additionally, the dividend cover ratio is expected to fall to 2.07 times in 2024, indicating a tightening of available earnings to cover dividends [acc4be39].
M&G currently boasts the highest yield within the FTSE 100, while the market has seen a total of 137 dividend cuts over the last decade, with 10 more anticipated in 2024. This landscape presents a mixed outlook for investors, balancing the allure of buybacks against the backdrop of potential dividend reductions and overall economic uncertainty [acc4be39].
As companies navigate these dynamics, the interplay between share buybacks and dividend policies will be crucial in shaping investor sentiment and market performance in the coming years. The resilience of the FTSE 100 amidst these challenges reflects broader trends in corporate finance, where strategic capital allocation remains a focal point for many firms [acc4be39].