Today, I’m looking at the latest dividend forecasts for three of the most popular UK banking stocks – Lloyds Banking Group, Barclays and HSBC Holdings.
As analysts’ dividend estimates constantly fluctuate, it pays to review them every so often. I’m going to make this a quarterly feature on Dividend Wealth going forward.
Here’s a look at the latest forecasts for 2018/2019. All figures are sourced from Stockopedia.
Analysts currently expect Lloyds (LON: LLOY) to pay the following dividends:
2018 – 3.59p per share
2019 – 3.73p per share
At the current share price of 65p, those payouts equate to yields of 5.5% and 5.7%.
While those yields look decent, it’s worth noting that analysts have taken a sledgehammer to their dividend forecasts for Lloyds over the last three months. For example, the 2018 forecast has been downgraded by 1.04p over the last three months. So, clearly, Lloyds is not going to be the cash cow that some thought it may be just a few months ago.
Analysts currently expect Barclays (LON: BARC) to pay the following dividends:
2018 – 6.37p per share
2019 – 8.27p per share
At the current share price of 207p, those payouts equate to yields of 3.1% and 4.0%.
In contrast to Lloyds, dividend forecasts for Barclays this year have been upgraded, after the bank stated in its recent FY2017 results recently that it anticipates resuming a 6.5p per share dividend this year. Over one and three months, consensus dividend forecasts have risen 0.44p and 0.74p respectively. Having said that, for 2019, analysts are downgrading their dividend estimates. Over one and three months, the consensus 2019 dividend forecast has fallen 0.22p and 0.53p respectively.
Analysts currently expect HSBC (LON: HSBA) to pay the following dividends:
2018 – 52c per share
2019 – 52c per share
At the current share price of 665p, those payouts equate to yields of 5.6%.
Over the last one and three months, analysts have upgraded their dividend estimates for 2018 and 2019 by a negligible 0.3c.
A 52c per share payout would be a 1c rise on the last three payouts of 51c. However, I’m not convinced we’ll even see that level of growth as HSBC recently stated in its full-year results that it is confident it can “maintain” the current dividend but failed to mention the prospects of any dividend growth. It’s worth noting that HSBC shares have taken a 15%+ hit over the last few months, so the yield is now quite tempting.
Which bank is the best dividend stock right now?
Lloyds Bank is still the winner for me, despite the recent dividend forecast downgrades. The bank has a high yield, has put together four consecutive dividend increases now, and we should be looking at a 15%-20% dividend increase this year. Lloyds also has the lowest valuation of the three banks, with a forward-looking P/E ratio of just 8.4.
Disclosure: Edward Sheldon, CFA owns shares in Lloyds Banking Group.
This article is provided for general information only and is not intended to be investment advice. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.