Lloyds Banking Group (LSE: LLOY) currently offers a dividend yield of 3.9%, based on dividends paid over the past 12 months, which sits above the FTSE 100 average but trails many of its index peers.
A total of 21 stocks on the FTSE 100 are currently yielding above 4%, with Legal & General topping the list at 7.4%, making it one of the most attractive income plays on the index.
Analyst forecasts, however, suggest Lloyds could close that gap significantly within five years, with consensus estimates pointing to a 2030 dividend of 7.84p per share.
Based on a current share price of 103p, that projection implies a forward yield of 7.6%, already edging close to what Legal & General is delivering today.
Lloyds reported stronger-than-expected earnings at its half-year results in July, declaring an interim dividend 9.7% above analyst forecasts, which could push future dividend estimates higher.
If the 2030 consensus dividend prediction is revised upward by that same 9.7%, the implied forward yield rises to 8.5%, comfortably ahead of both savings accounts and government bonds.
Legal & General is not standing still, with the company’s directors pledging to increase the 2026 and 2027 payouts by 2% per annum, though no comparable long-range forecast data is publicly available beyond that commitment.
If Legal & General continues raising its dividend at 2% annually through 2030, it would be paying approximately 24.05p per share, implying a forward yield of 8.1% against a current share price of 296p.
On those projections, Lloyds’ forward yield would exceed Legal & General’s by 2030, representing a meaningful shift in the income pecking order among FTSE 100 blue chips.
Investors should approach these figures with caution, however, as five-year dividend forecasts carry significant uncertainty and payouts are never guaranteed.
Key risks to Lloyds’ dividend outlook include a UK economic downturn driving higher loan defaults, reduced new business volumes, and the possibility of a windfall tax on its earnings.
Analysts currently forecast earnings per share growth of 144% for Lloyds between 2025 and 2030, a figure that some observers consider overly optimistic given the unpredictability of the macroeconomic environment.
The UK economy has shown more resilience than many anticipated, providing at least a degree of confidence that Lloyds can sustain earnings growth and continue building its dividend over the coming years.
The argument for Lloyds as an income stock also rests on the view that its share price may not fully keep pace with dividend growth, meaning the yield could drift higher even without a significant reduction in the share price.
For investors focused on building income from equities, Lloyds presents an increasingly compelling longer-term case, even if its current yield remains well below that of Legal & General in the near term.
