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Utilizing dividend forecasts generally is a useful gizmo when making an attempt to weigh up a possible funding alternative. Based mostly on knowledge and analyst viewpoints, adjustments in dividends for the approaching years may help assess the sustainability of the earnings going ahead. Once I noticed the forecast for this FTSE 250 inventory, I made a decision to analysis it additional.
Earnings development anticipated
I’m referring to Harbour Power (LSE:HBR). The UK-based unbiased oil & fuel producer has a present dividend yield of 9.43%, with the share value down 26% within the final yr.
It primarily makes cash from promoting oil and pure fuel. Merely put, the extra it produces, and the upper the commodity costs, the extra income it makes. By way of dividends, Harbour has been constant in declaring and paying out earnings. For the previous few years, it has paid out money to shareholders and has an annual dividend coverage (like a $455m whole payout in 2025).
The enterprise made a serious acquisition of Wintershall Dea’s non-Russian upstream belongings final yr, which considerably elevated its scale, reserves, and manufacturing base. Trying forward, the monetary advantages of this needs to be mirrored in increased dividends.
Previously yr, the overall dividend per share funds totalled $0.26. This includes two standard dividends, an interim and a last one. This schedule is unlikely to vary trying forward. For 2026 the overall dividend is predicted to develop to $0.27, with the 2027 determine forecast at $0.29.
In fact, we don’t know the place the share value will likely be sooner or later for the yield calculations. Nevertheless, if I assume the present value and issue within the trade fee, the dividend yield may rise to 10.38%.
Noting the volatility
As a commodity inventory, the worth motion could be risky. The 26% drop prior to now yr is proof of this. One purpose for the transfer was heavy windfall taxes imposed by the UK authorities. The UK Power Income Levy has had a big influence on Harbour. Even whereas pre-tax earnings have been stable, in March it reported a tax invoice of $1.31bn!
The windfall tax regime has created uncertainty and decreased investor confidence. The truth that the tax is prolonged to 2029 (and should even be elevated) amplifies concern going ahead.
Other than that, oil costs have fallen over the previous yr. Despite the fact that this impacts the entire sector and never simply Harbour Power, it’s nonetheless a contributing drag on the inventory.
Dividend dilemna
The forecast for the dividend does look enticing. Nevertheless, if the share value retains falling, it may wipe out all the advantages of the earnings. Due to this fact, it’s a query of whether or not the high-risk nature of the enterprise is value it for a possible 10%+ yield. I don’t really feel it’s well worth the threat for my very own protfolio, nevertheless it’s a choice for every investor to make.
