On 1 August, Rolls-Royce (LSE: RR.) shares shot up. One reason for this was that the aerospace company said it plans to resume paying dividends to investors in the near future.
But what kind of payout are investors looking at here? Let’s take a look at the latest Rolls-Royce dividend forecasts for 2024 and 2025.
Dividends on the horizon
In its half-year results (posted on 1 August), Rolls-Royce said it plans to reinstate shareholder distributions (dividends) when it announces its full-year 2024 results.
It noted that it plans to start by paying out 30% of underlying profit after tax with an ongoing payout ratio of 30-40% each year.
Since then, City analysts have been scrambling to upgrade their dividend forecasts for the company. Currently, the consensus forecasts are:
- 2024: 4.2p per share
- 2025: 5.6p per share
At today’s share price of 480p, these estimates equate to yields of around 0.9% and 1.2%.
Forecasts can be off
I’ll point out that investors should take these forecasts with a pinch of salt. That’s because analysts’ estimates can be off the mark at times (especially when a company’s about to reinstate its payout).
But they can be a useful guide. In this case, it’s clear that investors shouldn’t expect a huge amount of dividend income from the stock in the near term.
When will the cash be paid?
In terms of the timing of the dividend payouts, I’d expect Rolls-Royce to make its first payment in early July 2025. This would be for 2024.
I’d then expect the company to pay a smaller dividend in early January 2026. This would be the interim dividend payout from 2025.
I could be wrong with this projected timing. But that’s how the company’s paid its dividends in the past.
Are the shares worth considering today?
As for whether the shares are worth investors considering them for their portfolios right now, I don’t see a huge amount of appeal in them after their enormous move higher. The share price is up more than 450% over the last two years.
Yes, the company has significant momentum right now (it recently raised its full-year guidance), but I reckon a lot of this is priced into the stock already. Currently, the stock’s price-to-earnings (P/E) ratio’s 29. That earnings multiple doesn’t leave a lot of room for error (eg missing analysts’ expectations due to a slowdown in the aviation industry, or a company-specific setback).
Having said that, it wouldn’t surprise me if the price was to continue moving higher in the short term. Sentiment towards the stock’s really bullish right now and the share price is in a strong uptrend (trends can last longer than expected). And with dividends about to come back, we may see more investors pile into the stock.
