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As a method of producing passive revenue, dividend shares from the FTSE 100 have at all times been fashionable. That is notably the case for these providing above-average yields.
However there’s a motive for pondering that demand for these might take off this 12 months.
Huge hitters
A fast verify with my information supplier reveals that the next top-tier firms at present supply forecast dividend yields over 6%.
- Authorized & Basic (LSE: LGEN)
- Phoenix Group Holdings
- M&G
- Land Securities Group
That may not look like many. However keep in mind that the FTSE 100 had a wonderful 2025. When share costs rise, yields fall (all else remaining equal).
For comparability, the index has a mean yield of three% — not dissimilar to the rates of interest being provided by financial savings accounts.
Though we’re not outfitted with a crystal ball, there’s a motive for pondering the latter might fall even decrease in 2026 primarily based on latest occasions.
Cuts-a-plenty
In December final 12 months, the Financial institution of England elected to chop the bottom fee down to three.75%. This introduced the variety of cuts to 6 since August 2024.
Justifying its choice, the Financial Coverage Committee (MPC) said that inflation had fallen considerably from the place it stood three years in the past and now sat at 3.2%. Furthermore, its members suppose this may proceed. This makes one other discount look doable, which will even brings down the saving charges provided on financial institution accounts.
Ought to this be the case, anybody with spare money could need to look elsewhere to get probably the most bang for his or her buck.
Monster dividend yield
Monetary companies supplier Authorized & Basic is a very fascinating proposition proper now. Regardless of rising 14% in 2025, the shares lagged the spectacular achieve made by the FTSE 100 index.
Nevertheless, the corporate’s beneficiant dividend coverage made up for this.
I think about this attraction will proceed to be the case in 2026. On the present value, analysts have the inventory yielding a large 8.5%.
One other enchantment is that the £15bn cap has an amazing report of elevating the amount of money returned to traders in most years. The one latest disappointment was in 2020. However provided that the world was within the grip of a pandemic on the time, I feel that we are able to let that one slide.
Not risk-free
After all, it might be decidedly un-Silly to imagine that dividends are assured. Authorized & Basic faces challenges, similar to any enterprise.
Amongst these are the extent of competitors in asset administration, retirement planning and insurance coverage (and the impression this could have on margins). For that reason, it’s unlikely to ever expertise large progress over a brief time period. Any hikes to money distributions are more likely to stay modest consequently.
Income are solely anticipated to only about cowl the whole dividend in 2026 as effectively. So, there’s a threat of a minimize if the corporate significantly disappoints on earnings not directly.
Price contemplating?
These considerations apart, I reckon Authorized & Basic is a good candidate to analysis for an income-focused portfolio and as a method for traders to make their cash work tougher in 2026 than it might in a bog-standard checking account.
Nevertheless it’s actually not the one dividend inventory price contemplating. Many lower-yielding members of the market may also ship above-average progress.
