The FTSE 100‘s a bit wobbly as people fear the upcoming budget. But it’s nonetheless holding up over 8,000 factors, and I feel the long run for dividends would possibly by no means have regarded higher.

However wait, aren’t FTSE 100 dividend forecasts being scaled again within the face of our gradual financial system? Effectively, sure. The all-time document dividend payout of £85.2bn got here in 2018. And as we’ve recovered from the Covid crash, it’s regarded set to be overwhelmed a few occasions.

However every year falls brief. And with solely a 1% development in dividend money forecast for 2024, it appears like we’ll nonetheless be a way from it this 12 months. A 1% rise isn’t even near protecting dividends up with inflation.

Beating the previous

Nonetheless, among the shortfall in dividends is because of one thing that’s truly good. Judging their inventory costs to be too low, numerous companies have been returning money by means of share buybacks as a substitute.

That gained’t put money straight into shareholders’ pockets. However with fewer shares in circulation, what it ought to do is increase future earnings and dividends per share.

And, in line with AJ Bell‘s most up-to-date Dividend Dashboard, we might be on for a 7% soar in dividend funds in 2025. That would take us near the 2018 document. Can 2026 then get us into new document territory? I feel there must be an excellent probability.

I do know we’ve been disillusioned by whole dividend forecasts being scaled again. However I would like to try a dividend inventory I’m contemplating for my investments.

Dividend favorite

I’m speaking about British American Tobacco (LSE: BATS), with a forecast yield of 8.3%. And that’s even after the share price has seen a little bit of a resurgence this 12 months.

In addition to the fats yield, I like just a few different issues concerning the British American dividend. One is that cowl by earnings appears appears sturdy sufficient. We’re taking a look at about 1.3 times-1.35 occasions over the subsequent three years.

In some industries with extra uncertainties, that might be a bit skinny. However on this case it’s a enterprise with a reasonably clear view of probably revenues and prices. And that’s one other factor I like.

And I significantly like the truth that dealer forecasts present earnings per share (EPS) and dividends persevering with to rise within the subsequent three years. In the event that they’re proper, EPS would enhance by 14% between 2024 and 2026, with dividend money up 9%.

The massive threat for British American Tobacco, after all, is the tobacco half. Will the world some day shun it and consign it to historical past? Some suppose it can, some suppose British American can hold going with new merchandise.

Buybacks too

Oh, and on prime of its dividend payouts, British American can be shopping for again its personal shares. And buybacks, or at the least the tip of them, are a key factor that I feel might assist push us into a fantastic decade for dividend traders.

When share costs have recovered sufficient for buybacks to make much less sense, it might imply additional cash for dividends.