Lloyds Banking Group (LSE: LLOY) has paid its shareholders some big dividends in recent years. Last year, however, the FTSE 100 bank was forced to suspend its dividend by the Bank of England. The regulator wanted to ensure that UK banks had enough capital on hand to support the economy during the coronavirus pandemic.
Will Lloyds pay a dividend in 2021? Let’s take a look at what the company has said about its distributions going forward.
Will Lloyds’ dividend make a comeback in 2021?
In Lloyds’ full-year results for 2020, posted in late February, the bank advised that its board had recommended a final ordinary dividend of 0.57p per share for 2020. This was the maximum allowed under the Bank of England’s guidelines.
This dividend is set to be paid on 25 May 2021, which is only a few weeks away now. The ex-dividend date for this was 15 April 2021. A stock’s ex-dividend date is the day on which all shares bought no longer come with the right to be paid the most recently declared dividend. In other words, to receive this dividend from Lloyds, investors had to hold the stock on 14 April.
In its full-year results, Lloyds also said that its intention is to accrue dividends and resume a progressive and sustainable ordinary dividend policy in the future.
2021 dividend policy
More recently, in its trading update for the first quarter of 2021, Lloyds advised that it still intends to resume this ordinary dividend policy. It also said it expects the dividend this year to be at a higher level than 2020.
However, right now, Lloyds is still restricted by the Bank of England’s policy on bank dividends. It’s waiting for the regulator to transition back to its standard approach to capital setting and shareholder distributions. This is expected to occur at some stage during 2021 (possibly in the next few months). Under this framework, bank boards are responsible for making distribution decisions.
Lloyds has said that it will update the market on interim dividend payments with the half-year results, subsequent to reviewing the Bank of England’s update on distributions. This is expected ahead of the half-year results reporting cycle for the large UK banks.
Lloyds’ dividend forecast 2021
As for the dividend forecasts for Lloyds shares, the consensus forecast for 2021 is currently 1.74p per share. Meanwhile, the consensus forecast for FY22 is 2.29p per share. At the current share price, these forecasts equate to yields of 3.8% and 5% respectively.
It’s important to remember that these are just forecasts, though. Sometimes, analysts’ views can be way off the mark.
The final word
In summary, Lloyds is going to pay dividends in 2021. Shareholders can expect to receive their first payout of 0.57p per share on 25 May 2021.
However, beyond that, we don’t have much clarity in relation to Lloyds’ dividend. Payouts are likely to depend on a few factors including its level of profitability as the UK economy recovers from Covid-19, and rules set by the Bank of England. And as always with dividends, payouts are never guaranteed.
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Edward Sheldon owns shares in Lloyds Banking Group. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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