There is no denying that 2021 has been a good year for FTSE 100 dividends. And 2022 might well be one as well, going by the fact that we have seen a fair bit of recovery so far. At the same time, I do believe that the macro-economic scenario has evolved a lot recently, which in turn could impact the level of dividends paid by some companies this year.
FTSE 100 metal miners’ dividends
For instance, consider industrial metal miners. They have had the best dividend yields among all FTSE 100 stocks this year. Some of these have even been in double-digits. But are they likely to sustain these yields? That is a question worth me asking, because there is a big shift in the underlying reason for their generous payouts. The Chinese government’s policy stimulus pushed up demand for these metals, resulting in an unexpected bonanza for them. This in turn allowed them to increase their dividends.
Their share price fortunes have altered since China decided to roll back the massive public spending as this has resulted in a dip in their stock prices. Yet temporarily at least, this has pushed up their dividend yields even further, because the dividend amounts have not changed. However, prices for industrial metals are expected to soften further in the next year, which means that these companies’ financials will probably not grow as well as they did recently. And that in turn could impact dividends. They are still good stocks, to be sure. But I would not buy them today for my portfolio solely based on their dividend yields, because I really cannot say how they will look in 2022.
Is a housing market crash coming?
Similarly, I’d be cautious of FTSE 100 real estate stocks too. They too have seen significant buoyancy on account of the UK Government’s encouraging policies. However, the roll-back of the stamp duty holiday has led to speculation of a housing market crash, which could impact them quite a bit. I like these stocks for their long-term performance and even as recovery plays, but just to avoid disappointment, I would not buy them with just their dividends in mind for 2022.
FTSE 100 dividend stocks I’d buy now
However, there are some stocks that have more going for them than not, I feel. Among them are the oil biggies, which I think are looking at some really good times in 2022 if the Omicron variant does not sent the world reeling back into a long drawn out lockdown again. Their dividend yields are not among the highest, but I reckon that it is only a matter of time before they get much better. With the pivot towards clean energy, these might not be the best stocks to hold for the very long term, but for now they make good purchases in my view. That is why I have bought them.
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Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.