I’m looking ahead to 2022 to see which FTSE 100 stocks have the highest dividend forecasts. These three shares have the highest forecasted yields out of the whole FTSE 100 index.
Let’s take a look to see if I should buy them for my income portfolio.
A FTSE 100 dividend stock
The company with the highest forecast dividend yield is Evraz (LSE: EVR) with an eye-popping forward-looking yield of 20% as I write. Now, with a dividend yield this high, I question just how sustainable it will be. It’s perhaps too high at this level.
Evraz operates in the mining sector, specifically as a miner of iron ore and coal, while also manufacturing steel. In the half-year report to 30 June, net profit surged to $1.2bn, which increased from $513m in the same period one year ago. Management said higher steel, vanadium and coal sales prices were factors leading to the outstanding performance.
However, Evraz hasn’t always paid a dividend in recent times. The company depends on one area of the commodity market, namely steel. If steel prices do fall then Evraz’s profits will decline, which will likely lead to a reduction in the dividend. Indeed, management noted some caution over “a possible correction in steel prices” in the half-year report.
I’m going to sit this one out for now as I think there are less risky dividend stocks to consider.
A ‘safer’ FTSE 100 mining stock
I’m also looking at Rio Tinto (LSE: RIO), another FTSE 100 mining stock. Only here, the company is diversified across the commodity markets in both industrial and precious metal mining.
Rio Tinto has benefited from a boom in economic growth since the pandemic last year. This has boosted company profits, and then its ability to pay above-average dividends. But with the dividend forecast being for a huge 17% yield, so again, I don’t expect this to be maintained.
Rio Tinto has consistently paid a dividend though. In fact, the last dividend payment it missed was in 2009, just after the financial crisis. Nevertheless, the company is still cyclical, and demand can fall quite drastically if economic growth begins to slow. It’s a key risk to consider before I invest.
On balance, I think Rio Tinto is the safer mining stock with a double-digit forecasted yield. I’d buy the shares for my portfolio.
Savings and investment
The last company is M&G (LSE: MNG). It’s a savings and investment company, and in 2019 it completed a demerger from Prudential.
The current dividend yield forecast is almost 11%, which makes it the third-largest dividend forecast in the FTSE 100. It’s paid a dividend every year since the demerger completed, albeit this is only since 2019. The company is also able to generate double-digit returns on its equity, which can be a sign of a quality business.
The risk with M&G is that business performance is tied to its assets under management (AUM). Performance can decline when financial markets fall, or even worse, crash. This will lower the fees the company can generate on its AUM, and therefore its dividend would likely be cut.
M&G’s management is committed to its dividend policy though, so I still see this as a strong dividend stock to consider for my portfolio.
