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Despite all the turbulence seen in the first six months of the year, forecasts for aggregate FTSE 100 earnings and dividend payments for 2026 are up slightly over the last three months.
Analysts now expect total ordinary dividend payments of £88.8 billion this year, compared to £88 billion in March and £86 billion at the turn of the year. Estimates for 2027 are also higher than they were three and six months ago.
As a result, consensus analysts’ estimates suggest that 2018’s all-time high FTSE 100 dividend payment of £85.2 billion will finally be exceeded both this year and next.
Share buybacks to boost total returns from the FTSE 100
Share buybacks could yet supplement this total. The FTSE 100’s members have already declared cash returns worth £36 billion via this mechanism for 2026. Add that to the forecast dividend payments and the total cash return from the FTSE 100 is currently expected to be £124.8 billion in 2026, or 4.7% of the FTSE 100’s total £2.7 trillion stock market valuation.
That cash yield beats inflation and the Bank of England base rate. However, the benchmark 10-year gilt yield is still slightly higher, at around 4.8%, and the fixed-income asset class could attract more investor attention as a result, especially from yield hunters.
Lower input costs would ease pressure on company profit margins across many industries and also potentially boost revenues for others if consumers find themselves with more disposable income than expected once fuel and other bills are paid.
Oil’s rapid retreat from its high of $120 a barrel in the spring is therefore good news, and the retreat below $80 at the time of writing does not unduly puncture profit estimates for the two oil majors, BP and Shell, either. Crude traded at $70 a barrel before the war began and futures markets have yet to price in a return to that mark, to reflect lingering doubts over the Middle Eastern peace deal.
Profit forecasts are holding up
The good news is that profit forecasts are not showing any strain. Since March, analysts have actually upgraded their FTSE 100 profit forecasts for 2026 and 2027, for a second consecutive quarter of upgrades.
Both this year and next are expected to set a new all-time high for pre-tax income, at £291 billion in 2026 and £302 billion in 2027 respectively, well ahead of 2022’s peak of £231 billion.
Those investors who are of a nervous disposition may look to earnings cover for the FTSE 100’s aggregate forecast dividend payments for reassurance.
For 2026 and 2027, analysts see earnings cover coming in at 2.26 times and 2.28 times, respectively. This is not as high as 2022’s reassuring level, which exceeded 2.5 times, but it does still come in above two times, the mark traditionally seen as one that offers comfort and protection in the event of any unforeseen economic setback.
Russ Mould: Investment Director
Russ Mould is AJ Bell's Investment Director. He has a Master's degree in Modern History from the University of Oxford and more than 30 years' experience of the capital markets.
He started out at Scottish...
