Lloyds shares: here are the dividend forecasts for 2023 and 2024!

At Lloyds Banking Group (LSE:LLOY) share price has fallen 7% in 2022. This has driven the bank’s dividend yield even higher FTSE 100 average.

For 2023, Black Horse bank yields 5.9%, higher than the 3.7% average for FTSE index stocks. And the dial moves to a better 6.5% for 2024.

I am looking for ways to generate additional income for the next two years. And at first glance, Lloyds shares may be just what I’m looking for. But how much can I trust the current dividend forecast?

Dividend growth

Lloyds understands the importance of paying large dividends to shareholders. So it has been aggressively making shareholder payments as it recovers from the pandemic.

The total payout will be 2p per share in 2021 from 0.57p in the previous year. And in July it increased its interim dividend by 20% year-on-year, to 0.8p.

The next dividend payment on shares of City Analysts Inc. have paid 2.4 p. in 2022.

Despite the tough economic outlook, brokers are also increasing dividend growth in the short term. Dividends of 2.7p and 3p per share are forecast for 2023 and 2024, respectively.

good protection

It seems that the current dividend estimate also looks realistic. First, they are covered 2.7 times their expected earnings. This provides a wide margin of error if earnings disappoint.

Lloyds could also use its cash-rich balance sheet to help pay anticipated dividends. The bank’s CET1 capital ratio (after dividends and pension contributions) was at 15% in September. This exceeded the target of 12.5% ​​plus the management buffer of 1%.

But Lloyds stock buy?

Of course there are no guaranteed dividends. The sudden outbreak of Covid-19 – and the colossal impact it is having on shareholder payouts around the world London Stock Exchange – is proof of this.

But on paper Lloyds looks very good at meeting its dividend forecast for next year. Focusing on a stable retail banking sector will also help achieve this.

Demand for financial products like current accounts and credit cards remains strong at all points in the economic cycle. So profits at Lloyds can remain more stable than other banking stocks.

Here’s what I’m doing right now

However, I am not convinced that the bank will continue to grow significantly beyond next year. These gains are still linked to the UK’s economic performance. And with some economists predicting a prolonged recession until 2024, things could get bumpy.

The level at which Lloyds is stashing away money for future bad loans is a big red flag for me. It set aside £688 million in the three months to September, for a total of more than £1 billion.

The dividend outlook also remains uncertain beyond 2024. I think Lloyds may struggle to generate decent income as the UK economy struggles with the hangover of Covid-19 and Brexit-related issues.

As a long-term investor, I prefer to buy more dividend stocks for the New Year.