Here’s What AJ Bell Expects from FTSE 100 Dividends this Year

FTSE 100 investors can look forward to steady dividend growth in 2025, but yields are becoming less generous as share prices rise, according to AJ Bell Investment Director Russ Mould.

“The FTSE 100 has performed well so far in 2025 and has hit new highs,” Mould said in a September 19 article. 

“That share price success might have delivered capital gains for investors but also means the prospective dividend yield is less attractive, currently offering 3.3%.”

The index had delivered a total return of 16% in the year to 18 September, combining capital gains and dividends. 

However, Mould believes income investors face increasing concentration risk, with ten companies expected to pay 53% of the total £42.2 billion in dividends this year. 

The top 20 firms are forecast to contribute 70% of payouts, led by oil, pharmaceutical, banking and consumer staples groups.

Mould noted that currency movements could also affect returns, as 30 FTSE 100 companies, including new entrant Metlen Energy & Metals, pay dividends in euros or U.S. dollars. 

“The strength of the pound against the euro and particularly the dollar this year reduces the value of the dividend in sterling terms,” he said.

Dividend cover has fallen below two times for the first time since the pandemic, at 1.96, suggesting less headroom for payouts if profits weaken. 

Mould cautioned that investors should focus on balance sheet strength and cash flow, warning that “any dividend yield which exceeds the risk-free rate by a factor of two may turn out to be too good to be true.”