What if I said there could be a fortune of more than £120bn that we could get our hands on this year? Where might it come from? From FTSE 100 stocks, that’s where.
That’s based on the latest Dividend Dashboard research from investing firm AJ Bell. It shows the amount that could be handed back by the UK’s top companies in 2023. And it would make it the third best year ever for cash returns from the FTSE 100.
Just think of that for a moment. Prices in the shops are soaring, and we have less spare cash in our pockets. But… the third best year of all time for UK shareholder rewards!
Big dividends
Forecasts predict a total of £83.8bn in Footsie ordinary dividends this year. On top of that, firms have announced £38.2bn in share buybacks so far.
I make that a total of £122bn to be handed out. Oh, plus any special dividends. Plus any more buybacks yet to come. Now, there might not be any more of either. But it’s still a huge amount of cash for us to try to bag some of. So how do we do it?
Well, we buy shares in FTSE 100 companies. And, I’d say, ideally in a Stocks and Shares ISA, to keep all those lovely profits free of tax.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Dangerous world?
Some people think investing in shares is like entering a world of mystery and intrigue. One where we have to constantly look over our shoulders for the sharks who want to rip us off.
Actor Woody Allen famously once described a stockbroker as “someone who invests other people’s money until it is all gone.”
But it doesn’t need to be like that at all. At least not these days, when low-cost share dealing is a few clicks away. And we can invest as much or as little as we want, and make our own choices.
Corner shop
Buying stocks and shares is not like signing a pact with the devil. It’s more like running a corner shop. We get to own a business, or at least a part of it. And then the dividends make up our slice of the annual profits.
In fact, it’s better than that. A lot of small shops are struggling right now, and plenty have gone under. But if we buy shares in a range of companies in different sectors, it can be a lot less painful if one of them hits a rough patch.
Long-term plan
So I build up, little by little, stakes in the companies that I think are the best cash cows in the FTSE 100.
I diversify my ISA to cover a range of sectors and help improve my safety. There’s still a risk that I might get a bad year for dividends, like we had in 2019. So I’m in it for the long term, for at least the next 10 years.
Oh, and I’ll reinvest all my dividends to try to grab a slice of next year’s cash too. Forecasts suggest an even better year in 2024.
