FTSE 100 dividend projections pared back as profit forecasts fall

(Sharecast News) - Analysts have trimmed their projections for dividend across the FTSE 100 for 2025, with payouts set to grow by just 2% despite the UK equity index trading close to all-time highs. According to AJ Bell's second-quarter Dividend Dashboard released on Monday, £80.4bn in dividends are expected to be paid out by FTSE 100 companies in 2025, down from the £83bn forecast three months ago.

The amount, which represents a 2% increase on 2024, puts the FTSE 100 on a forward dividend yield of 3.5%.

Notably, none of the Footsie's constituents have declared special dividends for 2025 yet, compared with £3.7bn of special dividends offered collectively by HSBC, Fresnillo, Berkeley Group, Associated British Foods and Admiral in 2024.

Despite the relatively mild dividend growth, share buybacks have grown strongly so far this year, with £39bn in repurchases already announced by blue chips in the first quarter - more than half of 2024's record total of £58.3bn - though Next and Bunzl have called a temporary halt to their schemes.

"Adding together the forecast dividend total of £80.4 billion to the planned buybacks gives a total cash return of £119.4bn, some 5.25% of the FTSE 100's total £2.3trn stock market valuation," said AJ Bell's investment director Russ Mould.

"That cash yield beats inflation, the 10-year gilt yield and the Bank of England base rate which, on balance, still seems set to go lower before it goes higher once more."

Nevertheless, Mould noted that profit forecasts for FTSE 100 constituents have started to "sag", falling 7% in pre-tax income terms over the past three months, while estimates for 2026 have been reduced by 6%.

"It is far from unusual for analysts to start in an optimistic fashion and then start to pare back their forecasts as a year develops. So far, 2025 fits that pattern and hopes for a new all-time high in pre-tax profits from the FTSE 100 are starting to dissipate," he said.