Is next year going to be better? Let’s take a look at the 2021 dividend forecasts for three of the UK’s most popular income stocks – Barclays (LSE: BARC), HSBC Holdings (LSE: HSBA), and BT Group (BT.A).

2021 dividend forecasts: Barclays and HSBC

2020 was a nightmare for anyone who owns UK bank shares for income. Early in the year, the Bank of England (BoE) banned all UK banks from paying dividends to investors. The logic behind this move was that banks would need as much capital as possible to support the economy during the coronavirus pandemic. As a result of this ban, Barclays and HSBC paid no distributions for the year.

Will UK banks be able to resume paying dividends in 2021? I think it’s certainly possible. According to a recent article in The Times, the BoE and the major banks are currently ‘bartering’ a dividend deal. This deal would allow them to make shareholder payouts as long as their loss-absorbing capital buffers are strong and they continue to extend credit to the real economy.

Interestingly, the consensus 2021 dividend forecast for Barclays is currently 5.01p per share. Meanwhile, the consensus 2021 forecast for HSBC is 27 cents per share. These forecasts – which equate to yields of around 3.6% and 5.1% respectively – suggest that analysts believe the BoE dividend ban will be lifted next year.

Of course, analysts’ forecasts are not always accurate. They can be way off the mark at times. So, there’s no guarantee that Barclays and HSBC will pay these kinds of dividends in 2021. If economic conditions remain weak, the BoE may keep its dividend ban in force. However, if City analysts are right, 2021 should certainly be a better year than 2020 for those who own UK bank stocks for income.

Will BT pay a dividend for FY21?

Turning to BT, the near-term dividend prospects are not so encouraging.

This year, BT hit investors with a double blow. Firstly, it advised that it was suspending its final 2019-20 payout. Then it advised that it would be paying no distribution for 2020-21. This means investors should expect no payout for FY21 (BT’s financial year ends 31 March 2021). Currently, city analysts expect no dividend to be paid.

Looking further out, however, analysts do expect BT to pay dividends for the year ending 31 March 2022. At present, the consensus dividend forecast is 7.6p per share. That payout – which is about half of what BT paid for FY19 – equates to a yield of roughly 6.2% at the current share price.

But it’s worth pointing out that BT continues to have a large amount of debt on its balance sheet. It also has a large pension deficit. As such, even that reduced dividend may not be sustainable. For those looking for yield, I think there are better stocks to buy. 

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Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has recommended Barclays and HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Indeed, there are already indications of that. Banks like Standard Chartered and Lloyds Bank expect to start paying dividends from late 2021 too. But we don’t have to wait for them. 

Even now, some FTSE 100 companies are paying dividends. In fact, some have started paying them after pausing them for a bit earlier in the year, like the property developer Persimmon.

The challenge, though, is that of yield. With broad-based dividend cancellation and cuts, yields have diminished in 2020. But there’s good news here too. There are at least three FTSE 100 stocks that have an over 5% dividend yield even now. 

#1. GlaxoSmithKline maintains dividends on stable earnings

The first is GlaxoSmithKline, which has an appreciable dividend yield of 5.5%. With a gradual drop in share price over the past six months, GSK’s yield looks particularly elevated because of nothing more than the nature of yield calculation. Yield is the dividend amount as a percentage of current share price. If the share price falls, the yield increases. It’s not rocket science.

The important question is — why is GSK’s share price falling? It had a sluggish recent earnings report, with a decline in both revenue and adjusted operating profit. By comparison, peer AstraZeneca has shown better performance, including the release of results of its Covid-19 vaccine tests. The good news, however, is that GSK still expects earnings per share to be stable. Dividends should stay, it follows. Its performance should also pick up in 2021, boding well for dividend holders.

#2. Rio Tinto’s performance could improve in 2021 

The FTSE 100 multi-commodity miner, Rio Tinto, has an even higher dividend yield of 6%. Industrial metals’ prices have shown a sharp rise this year, which is positive for the miner. With global growth expected to be better next year, especially with a focus on infrastructure creation through public spending, it should continue to see better times ahead. 

Notably, unlike GSK, its high dividend yield isn’t because of a sagging share price, but despite a rising one. I’ve long maintained that it’s a good buy and continue to do so.

#3. National grid’s increased dividend 

Lastly, the FTSE 100 energy provider, National Grid, is an income investment to consider. It has a dividend yield of 5.5% and it even increased its interim dividend recently. Despite a Covid-19 hit, the company has turned in a decent set of results with an increase in revenues and pre-tax profit, even though operating profit was down. I’ve been a bit vary of the stock recently because of uncertainty around it. But, its share price has fallen quite a bit. It’s one I’m considering buying now, while the price is still low.

The post 3 FTSE 100 stocks I’d buy for a 5%+ dividend yield  appeared first on The Twelfth Magpie.

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Manika Premsingh owns shares of AstraZeneca. The Motley Fool UK has recommended GlaxoSmithKline, Lloyds Banking Group, and Standard Chartered. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Is next year going to be better? Let’s take a look at the 2021 forecasts for three of the UK’s most popular dividend stocks – Royal Dutch Shell (LSE: RDSB), Vodafone (LSE: VOD), and Royal Mail (LSE: RMG).

2021 dividend forecast: Shell

2020 was a terrible year for those who own Shell for the dividend. After maintaining a full dividend for over 70 years, the oil giant reduced its quarterly payout from 47 cents per share to just 16 cents per share in the first quarter of the year. That represented a cut of 66%. Shell did lift its payout by 4% in the third quarter, to 16.65 cents per share, but that’s not likely to have cheered income investors too much.

Looking ahead to 2021, City analysts currently expect Shell to pay out total dividends of 77 cents per share. However, that forecast looks too high to me. Given that the payout is currently 16.65 cents per share, I’d be amazed if the total payout is greater than 70 cents. If Shell was to pay out 70 cents per share, that would equate to a yield of about 4% at the current share price.

Would I buy Shell for income today? No. The company has lost its reputation as a reliable dividend payer after this year’s big cut.

Vodafone’s payout in 2021

Vodafone (whose financial year ended 31 March) was one company that didn’t cut its payout this year. While lots of companies in the FTSE 100 index cancelled, suspended, or cut their dividends, the telecommunications giant remained committed to its payout. In its full-year results, it declared a full-year dividend of 9 euro cents, while in its first-half results, it declared a payout of 4.5 euro cents. Both payouts were the same as last year.

Looking ahead, analysts forecast a full-year payout of 9 euro cents for year ending 31 March 2021 and a payout of 9.2 euro cents for the year ending 31 March 2022. At the current share price, these payouts equate to yields of around 6.5%.

Is Vodafone a stock I’d buy for income? No. It cut its payout a few years ago, and dividend coverage remains weak.

Will Royal Mail pay a dividend in 2021?

Finally, Royal Mail (whose financial year ended 29 March), has been another terrible dividend stock to own this year. In its full-year results for the year, posted in June, the company said it wouldn’t pay a final dividend for the year. It also said it didn’t intend to pay a dividend for the year ending 29 March 2021. It also advised last week, in its half-year results, it still intends to pay no dividend this year.

The goods news however, is that RMG has said its ambition is to re-commence dividend payments in the 2021/22 year. Currently, analysts forecast a payout of 6.14p per share for that year, which equates to a yield of about 2% at the current share price. That’s obviously a lot lower than the yields Royal Mail shares have offered in the recent past.

Is this a stock I’d buy for dividends? Definitely not. After cutting its dividend completely this year, RMG has lost its appeal as an income stock.

The post 2021 dividend forecasts: Shell, Vodafone, Royal Mail appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in Royal Dutch Shell. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.