Lloyds dividend forecast: Here’s what analysts predict for 2022 and 2023

| Last Updated August 28, 2022

analyst looking at the lloyds dividend forecast

With the recent stock market turmoil, a growing number of investors are wondering what’s happening with the Lloyds Banking Group Plc (LSE:LLOY) dividend forecast.

Historically, this banking stock has been a safe haven for many income investors in the United Kingdom. But can its payouts continue to provide a reliable passive income during a recession? Let’s see what analysts are currently predicting.

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How are the financials looking in 2022 so far?

At the start of the year, Lloyds bank announced an ambitious strategy of transforming its business. The goal is to generate a stronger long-term growth trajectory, opening the floodgates to higher, more sustainable returns.

That’s terrific news for income investors if the company can pull it off. And looking at the latest results, it seems the group is on track given the strong financial performance over the last six months. So much so that management actually raised guidance for the full year.

Net income landed at £8.5bn, up 12% on a year-on-year basis. Meanwhile, franchise growth and strong capital generation were recorded thanks to increased lending activity while keeping the loan-to-deposit ratio at 95%.

What is the Lloyds dividend forecast?

Lloyds interim dividend was announced at 0.8p per share – a 20% jump versus 2021 levels. And the next dividend payment is expected to be announced towards the end of the current fiscal year.

In the future, the company’s board intends to maintain its progressive and sustainable ordinary dividend policy. Moreover, the company plans to give due consideration to excess capital returns at the end of the year.

In 2021, Lloyds paid a dividend of 2p. According to this, the dividend yield was standing at 4.4%. While in 2022, the analyst consensus Lloyds dividend forecast for 2022 is 2.34p. If accurate, that indicates an impressive yield of 5.2% at the current stock price.

And in 2023, this upward trend in Lloyds’ dividend forecast continues. The average consensus estimates dividends per share will come in even higher at an impressive 2.69p. In the current low-interest economy, such attractive dividend yields are sure to capture the attention of investors like me.

Should I buy Lloyds shares for the income?

If I only focus on the dividend yield, the Lloyds share price looks like an attractive investment for my portfolio. After all, not many businesses can offer a sustainable 5% dividend yield.

Sadly investing successfully isn’t that simple. And in my experience, a more holistic approach is needed to weigh the risks and rewards when picking individual stocks.

Rising interest rates to tackle inflation do make for an ideal lending environment. But a recession does not. And the UK economy is currently in a bit of a pickle.

The Bank of England recently issued a warning for an “economic storm“, which is not to be taken lightly. During such a situation, banks are the first to receive the blow with increased loan defaults and a decline in profits. Needless to say, this could result in dividends taking a sharp blow as cash flow and earnings becomes adversely affected.

Final thoughts on the Lloyds dividend forecast

While some investors would still consider looking at the Lloyds dividend forecast for 2023 to further support their decision. In my opinion, when the economy is giving clear signs of a potential recession, it’s critical to take a step back.

Forecasts, by their very nature, are educated guesses and by no means guaranteed. That’s why personally, I think it may be best to keep this stock on my watchlist for now until a clearer picture forms of what lies in store for the British economy.

RELATED: What will happen to the Lloyds share price in 2022?

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Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and, therefore, may differ from the opinions of analysts in The Money Cog Premium services.