Dividends are never, ever guaranteed. But based on broker forecasts, the following FTSE 100 and FTSE 250 shares are set to deliver a market-smashing second income in 2025.
The average dividend yield for Footsie shares stands at 3.6%. As you can see, the yields on these UK shares sail past this figure, and then some:
| Dividend share | 2025 dividend yield |
|---|---|
| Legal & General Group (LSE:LGEN) | 9.9% |
| Greencoat Renewables (LSE:GRP) | 7.9% |
| ITV (LSE:ITV) | 6.9% |
| AVERAGE | 8.2% |
If analysts estimates are right, a £20,000 lump sum investment spread equally across these stocks will produce a £1,640 passive income next year.
I’m confident, too, that they could deliver a large and growing dividend beyond 2025 as well. Here’s why I think they’re worth considering right now.
Legal & General
With a dividend yield just below 10%, Legal & General is tipped to be one of the FTSE 100’s most generous income stocks next year.
There is peril here. The predicted dividend for 2025 is covered just 1.1 times by expected earnings, below the widely accepted security benchmark of two times.
Theoretically, this means dividends could fall below estimates if profits disappoint. However, Legal & General’s stunning cash generation means it still looks in good shape to meet City expectations.
As of June, its Solvency II capital ratio was 223%. This is more than double what regulators require. It’s also higher than those of Aviva, M&G, and Phoenix Group, other high-yielding financial services stocks.
With interest rates falling, I’m expecting profits and dividends to steadily rise as consumer demand improves.
Greencoat Renewables
Renewable energy stocks like Greencoat Renewables don’t face the same cyclical dangers as the likes of Legal & General. Demand for their product remains stable from year to year.
Yet shares like this still carry threat. For example, power generation — and by extension, earnings and dividend payments — can suffer when solar radiation is poor and the wind fails to blow.
I believe this threat is reduced with this particular FTSE 250 operator, however. With assets spanning Ireland and much of Continental Europe, the impact of unfavourable weather in particular regions is greatly diminished at group level.
Greencoat Renewables is also highly cash generative, which bodes well for future dividends. Its net cash generation during the first half of 2024 was three times the amount of dividends it paid out.
ITV
Earnings at broadcaster ITV have slumped in recent years as advertising spending dried up. Weak ad sales remain a threat going forwards, though the danger is reducing as interest rates begin to fall.
Today, City analysts expect profits at the FTSE firm to rise strongly through to 2026 at least. A recovery in advertising budgets, continued progress at its ITVX streaming platform, and post-strike conditions at ITV Studios all underpin their strong projections.
Against this backcloth, dividends are tipped to jump too. And with predicted payouts covered 1.9 times by anticipated earnings, dividend estimates also look well protected.
A strong balance sheet also supports ITV’s tasty dividend estimates. The firm’s net debt to adjusted EBITDA ratio was just 0.9 times as of June.
This post was originally published on Motley Fool
