How big will the IAG dividend be in 2024?

IAG shareholders could get a nice surprise next year.

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Man holding a calculator with Australian dollar notes, symbolising dividends.

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Insurance Australia Group Ltd (ASX: IAG) shares are a popular option for income investors.

Even Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) takes home a dividend paycheck from the insurance giant every six months.

In FY 2023, the company paid out a partially franked dividend of 15 cents per share. This was up from 11 cents a year earlier. And based on the current IAG share price of $5.89, it equates to a reasonably attractive 2.55% dividend yield.

But that's been and gone. What's next for the IAG dividend? Let's take a look.

The IAG dividend forecast

The good news for shareholders is that analysts at Goldman Sachs believe it is onwards and upwards for the IAG dividend in 2024 and beyond.

In fact, its analysts are expecting a big jump in its payout in FY 2024 thanks to a significantly improved performance.

According to a recent note, the broker has pencilled in a partially franked 28 cents per share dividend for the current financial year. That's a whopping 87% increase on its last dividend and will mean a much more attractive 4.75% dividend yield for shareholders.

But the increases aren't necessarily going to stop there according to Goldman. It believes an increase to 31 cents per share will happen in FY 2025, before another lift to 32 cents per share in FY 2026.

This will mean dividend yields of 5.25% and 5.45%, respectively, for investors.

Should you invest?

Currently, Goldman is sitting on the fence with IAG shares. It has a neutral rating and a $6 price target on them, which is just a fraction ahead of where they trade today.

It appears to believe that investors should wait for a better entry point before loading up on shares.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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