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It was looking like FTSE 100 dividend payouts in 2025 had a chance of beating the all-time high of £85.2bn set in 2018. Or at least coming very close.
But the latest Dividend Dashboard from investing company AJ Bell shows forecasts increasingly falling behind. Analysts have cut their earlier £83bn prediction to just £80.4bn. That’s only around 2% above 2024’s total.
And with the FTSE 100 up 11% so far in 2025, the expected dividend yield for the index has declined to 3.5%. But with share baybacks well ahead of last year so far, total shareholder returns look set to hit around 5.25%.
That’s better than the top Cash ISA returns, at a time when Bank of England rates are helping prop them up. And we can also hope for long-term share price gains.
Favourite income pick?
This latest data lends support to a dividend stock that’s been catching my eye of late and is worth considering. It’s NatWest Group (LSE: NWG). And it’s starting to look like it could be my next potential bank buy now that Lloyds Banking Group‘s undervaluation has been significantly outed.
NatWest boasts the biggest predicted dividend rise this year in cash terms, forecast to hand over an extra £532m this year. It looks like Lloyds is in for an increase of just £129m. Their market-caps aren’t very different — with Lloyds at £47bn compared to NatWest’s £40bn — so the figures are largely comparable.
I’m starting to like NatWest for other reasons too, mainly its lower valuation and strong forecasts. Oh, and the absence of threat from the car loan mis-selling verdict due any day from the Supreme Court.
Outperformance
NatWest shares have outperfomed Lloyds in the past couple of years. But we’re still looking at a lower forward price-to-earnings (P/E) ratio of under nine, compared to 11.7 at Lloyds.
The forecast dividend yield’s a bit better too, at 4.3% compared to 4.1%. But the fall in those previously massive bank yields shows valuations aren’t as screamingly cheap as I think they have been.
I think the main risk for NatWest shares is that we could see a sell-off if the economy doesn’t improve. The bank’s price-to-book ratio is a bit weak at just over one.
Other top FTSE 100 dividends
It means I see diversification among dividend stocks as essential right now. And that means my eye’s hovering over a few other long-term favourites.
Legal & General is on a forecast 8.4% yield. Cover by earnings looks a bit low at just 1.0 times, but the AJ Bell report points out that the dividend hasn’t been cut in the past decade.
I’m still drawn to Taylor Wimpey too, despite dividend cuts in 2019 and 2024 and modest cover of 1.0 times again. But I reckon housing demand means a reasonable chance of the dividend doing fine in the long term — also set to yield 8.4% this year.
Overall, the 2025 trend shows dividends slowing, with cover by earnings getting a bit thin. But buying FTSE 100 dividend stocks remains my top long-term strategy.
