Each of these FTSE 100 dividend shares offers yields well above the 3.9% index average for next year. Which should I buy for my UK shares portfolio for passive income in 2024?
Taylor Wimpey
Times are tough for UK’s housebuilders like Taylor Wimpey (LSE:TW) as higher-than-normal interest rates hammer buyer affordability. But hopes that the Bank of England (BoE) has ceased its rate-hiking cycle have boosted hopes that the worst could be over.
Recent data from the housing market has fed into this optimism. Indeed, latest Nationwide research last week showed average home prices unexpectedly rose 0.2% month on month in November. Such news supports broker predictions that the builders will continue to pay market-beating dividends.
City analysts are tipping Taylor Wimpey, for one, to keep 2022’s full-year dividend of 9.4p per share unchanged through to the end of next year. This projection yields an enormous 7.1%.
Buy I’m not convinced by this forecast. After all, 2024’s dividend projection is above projected earnings of around 9p per share. And profits are in peril of coming in below forecasts as the UK economy splutters and inflation exceeds the BoE’s 2% target.
On the plus side, Taylor Wimpey’s balance sheet remains robust. Net cash on its balance sheet actually ticked around 2% higher in the first half, to £654.9m. However, its financial position could deteriorate significantly if completions (which plummeted 26% between January and June) don’t pick up.
I plan to cling on to the Taylor Wimpey shares I already own. The long-term outlook for the company remains bright as the UK population steadily grows. But I’d rather buy other FTSE 100 shares to generate passive income next year.
Legal & General Group
Indeed, I’m thinking about adding more Legal & General Group (LSE:LGEN) shares to my FTSE 100 portfolio when I next have the opportunity.
Look, the financial services giant also faces upheaval in 2024 as the cost-of-living crisis rolls on. People could continue to have less money to invest and to spend on protection and retirement products. Operating profit here dipped 2% during the six months to June as people tightened their pursestrings.
Yet a cash-rich balance sheet means Legal & General is likely to continue paying big dividends, even if business remains subdued. Its Solvency II capital ratio rose to an exceptional 230% by the midway point of the year. Capital generation of £5.9bn, meanwhile, also outstripped dividends of £3.6bn.
City analysts agree with my upbeat assessment. They expect the FTSE firm to meet its goal of raising the annual dividend by 5% through to the end of next year. This results in a 9.4% dividend yield.
I’ve bought Legal & General shares twice this year on expectation of big dividends now and in the future. It has excellent growth opportunities as populations rapidly age in its key markets and fears over State Pensions increase. The company is expanding its operations in North America and Europe to capitalise in this too.
