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In terms of constructing long-term wealth, dividend shares on the FTSE 100 stay a cornerstone for a lot of traders. These corporations promise dependable earnings streams whereas providing some publicity to capital progress.
The true trick is trying past at present’s yield and into what analysts forecast for the years forward. Projections on dividend progress and earnings per share (EPS) can assist traders determine whether or not a inventory’s price holding — or higher left alone.
Two of the UK’s hottest earnings shares are Lloyds Banking Group (LSE: LLOY) and housebuilder Taylor Wimpey (LSE: TW.). Each have very completely different tales proper now, however forecasts counsel income-seekers may nonetheless discover causes to concentrate.
Lloyds Banking Group
Lloyds is essentially the most owned firm in Britain, with an estimated 2.3m individuals holding the shares. It’s lengthy been a favorite for dividend hunters, usually providing a yield above 5%. Nevertheless, a rallying share worth this yr has trimmed that yield to round 4.16%, with the inventory at the moment buying and selling at roughly 93p.
What’s attention-grabbing is the outlook. Analysts count on Lloyds’ dividend to rise steadily over the following three years. It’s forecast to succeed in 3.54p in 2025, then develop to 4.15p in 2026 and 4.76p by 2027. If these numbers maintain, the yield might climb shut to six% throughout the subsequent couple of years.
On the earnings aspect, issues look encouraging too. EPS is forecast to nearly double, from 6p at present to 11p by 2027. This could give the board extra respiration area to reward shareholders.
That mentioned, Lloyds is firmly tied to the well being of the UK financial system. A home downturn might enhance mortgage defaults, pressuring income. It’s a reminder that whereas the forecasts look vivid, banking shares are all the time on the mercy of wider financial situations.
Taylor Wimpey
If its headline yields that seize consideration, Taylor Wimpey takes the crown. Proper now, it’s the highest-yielding share on the FTSE 100 at a exceptional 9.72%. Traders have observed too — it was the third most-purchased UK inventory within the remaining week of August.
Nevertheless it’s not all clean crusing. The property market stays robust, with excessive inflation and stubbornly elevated borrowing prices denting housing demand.
The outcome? A share worth that’s dropped 42% over the previous yr.
Dividends have additionally been trimmed. Final yr’s payout was lowered by 1.25% to 9.46p per share. Analysts count on additional slight reductions, forecasting 9.15p in 2025 and 9.1p in 2027. Even so, yields are projected to stay near 9.5%, which remains to be effectively above most FTSE 100 friends.
Earnings are one other story, anticipated to fall to simply 3.18p per share in 2025, reflecting the near-term pressure on income. Encouragingly, forecasts counsel a rebound forward, with EPS doubtlessly recovering to 11p by 2027. That may put the corporate on a a lot firmer footing.
After all, the large threat for Taylor Wimpey stays the home property market. If inflation and the cost-of-living disaster persist, income might stay below stress longer than analysts count on.
Two engaging choices
I believe each these dividend shares are price contemplating, however their threat profiles couldn’t be extra completely different.
Lloyds affords steadier, incremental progress and may look the safer long-term wager for cautious traders. In the meantime, for these prepared to abdomen volatility for further earnings, Taylor Wimpey dangles a excessive yield however with extra fast dangers hooked up.
