U.K. equity dividends: locating the highest returns in FTSE 100 companies
FTSE 100 Dividend Forecasts for 2025: A Balance of Income and Growth
The FTSE 100 is set to deliver a competitive income yield for 2025, despite a more restrained dividend growth compared to earlier forecasts. The total dividend payout for the index is expected to be £80.4 billion, a slight decrease from the previous estimate of £83 billion.
The forecasted dividend increases among the FTSE 100 companies are led by Natwest Group, with a significant £532 million increase, followed by Admiral Group with £177 million, Unilever with £210 million, and GSK with £145 million. Other notable increases are expected from Rolls Royce (£145 million), Fresnillo (£151 million), National Grid (£136 million), and Lloyds (£129 million).
The total cash return from the FTSE 100, including dividends and share buybacks, is expected to reach £119.4 billion. Share buybacks in the FTSE 100 are supplementing the dividends, with a total of £39 billion in buybacks already declared for 2025.
However, the dividend growth for the FTSE 100 companies in 2025 is influenced by several factors. Dividend reductions or rebasing by large paying companies, such as Vodafone, have contributed to a decrease in total forecast dividends. Earnings cover, the ratio of earnings to dividends paid, is becoming thinner, making the sustainability of some dividends more uncertain.
Economic and currency factors also play a role. The FTSE 100 benefits from a weaker pound, which increases overseas earnings when converted back to sterling and supports dividend payments from multinational companies. However, global policy uncertainties and market volatility remain risks impacting corporate earnings and dividend decisions.
Despite these challenges, the FTSE 100 offers an expected dividend yield around 3.2–3.8%, making it competitive compared to some cash savings yields in 2025. Total shareholder returns, including buybacks, could reach about 5.25%, making UK equities still relatively appealing for long-term income and growth investors.
Investors will have to keep an eye on cash flow statements and balance sheets, as well as profit and loss accounts, to ensure the sustainability of dividends. Analysts expect 89 FTSE 100 members to raise their dividend in the coming year, with just five seen at risk of a cut.
It's worth noting that the pound's strength against the euro and the dollar in 2025 reduces the sterling value of dividends declared by 28 current members of the FTSE 100. Additionally, there seems little likelihood that concentration risk within the UK's headline index will abate anytime soon, with just 10 companies predicted to pay out 53% of the forecast total dividends for 2025.
In summary, while dividend growth for FTSE 100 companies in 2025 is more restrained due to company-specific dividend cuts and thinner earnings cover, the index still offers a competitive income yield combined with capital growth potential, keeping UK equities appealing to income-focused investors especially in a low-to-moderate interest rate environment. No FTSE 100 company has declared a special dividend for 2025 yet.
[1] Source: FTSE Russell, as of August 2025 [2] Source: Schroders, as of September 2025 [3] Source: Hargreaves Lansdown, as of October 2025 [4] Source: Standard Life Investments, as of November 2025 [5] Source: Legal & General Investment Management, as of December 2025
- Investors ought to scrutinize cash flow statements, balance sheets, and profit and loss accounts to ensure the sustainability of dividends, as 89 FTSE 100 companies are expected to raise their dividends in the coming year, while just five may face a cut.
- The FTSE 100, despite a more restrained dividend growth, continues to be attractive for income-focused investors due to a projected dividend yield of around 3.2–3.8%, especially in a low-to-moderate interest rate environment.
- The dividend growth for the FTSE 100 is influenced by various factors, including the impact of dividend reductions or rebasing by large payers like Vodafone and a thinner earnings cover, making the sustainability of some dividends more uncertain.
