The FTSE 100 has been a decades-long vacation spot for traders in search of a big, rising, and dependable passive earnings. However within the post-pandemic local weather, lots of the index’s dividend shares have did not stay as much as their earlier glories.

In truth, knowledge simply launched by a serious monetary companies supplier suggests it might be time for dividend hunters to look elsewhere for dividend-paying shares.

The crown slips

Octopus Investments — a large within the area of enterprise capital belief administration — says FTSE 100 shares “proceed to lag as a supply of dividend development” after the tip of the Covid-19 disaster.

It notes that money dividends from these blue-chip shares stay 20% beneath pre-pandemic ranges, including that “there doesn’t look like an imminent restoration on the horizon”.

Octopus believes Footsie dividends will likely be 11% beneath pre-virus ranges in 2025. This compares with development of 5% for UK shares when the FTSE 100 is excluded.

Consequently, the dividend yield on small- and mid-cap shares will surpass that of the FTSE for the primary time in a decade in 2025, Octopus says. This may be seen within the desk beneath:

Greater yields aren’t the tip of the story both. Dividend cowl — which measures an organization’s skill to ship the dividends analysts predict — can be increased exterior the Footsie. This, in flip, offers traders with improved peace of thoughts.

Octopus places this at 2.31 occasions for FTSE 250 (excluding info expertise) shares, 2.66 occasions for FTSE Small-Cap shares, and three.67 occasions for FTSE AIM shares.

All three outstrip protection of two.12 occasions for FTSE 100 companies.

So what subsequent?

Octopus’s forecasts present loads of meals for thought. However I don’t suppose they imply traders ought to think about abandoning the Footsie altogether within the quest for passive earnings.

Many UK blue-chip corporations nonetheless look set to pay giant and reliable dividends that develop over time. A big quantity have qualities like market-leading positions, a number of income streams, and robust steadiness sheets that enable them to offer dividends yr after yr.

Nonetheless, the Octopus report does illustrate the knowledge of casting a web far and large in terms of investing. Impression Healthcare REIT (LSE:IHR) is one prime mid-cap inventory that isn’t on the purchasing record of most dividend traders. And I believe it’s a prime purchase as we speak.

A prime dividend inventory

This property inventory operates a portfolio of residential care properties within the UK. Lengthy leases assure it a gradual earnings, no matter financial situations, whereas inflation-linked lease will increase present the inspiration to develop earnings (and thus dividends) over time.

Its classification as an actual property funding belief (REIT) additionally means Impression should pay at the least 90% of annual rental earnings out within the type of dividends. For 2024 this interprets to a huge 8.4% dividend yield.

Please notice that tax remedy is dependent upon the person circumstances of every shopper and could also be topic to alter in future. The content material on this article is offered for info functions solely. It’s not supposed to be, neither does it represent, any type of tax recommendation.

On the draw back, the REIT’s share worth might keep below strain if rates of interest stay at elevated ranges. However on steadiness the outlook right here is fairly sturdy, with the UK’s quickly rising aged inhabitants primed to spice up demand for its companies.

I consider constructing a balanced portfolio of FTSE 100 shares and different shares (like Impression) is an effective way to make long-term passive earnings.