According to the dividend forecast, £5k in this income stock could eventually make £1k a year

Dividend forecasts are really useful pieces of information that I don’t think are appreciated enough. Of course, no one can perfectly predict what future income a company will pay out.

But based on opinions from analysts and brokers, the projected figures can be a good indicator whether a stock should be worthy of consideration. Here’s one investors might find interesting.

Solar flair

Foresight Solar Fund‘s (LSE:FSFL) a UK-based renewable energy investment that primarily targets solar assets (as the name suggests). The share price is down 16% over the past year, which is one factor that’s pushed up the dividend yield to 10.81%.

The FTSE 250 stock makes money by generating revenue from the portfolio of large solar farms. These assets generate electricity, which is then sold to the grid or through Power Purchase Agreements (PPAs) with businesses. When buying new assets, the fund focuses on operational solar farms with a proven track record. This is a good thing, as it reduces the development risk associated with new or unproven sites.

Given the relatively stable nature of the cash flow from the contracts, it’s logical that dividend investors would find this stock appealing. Over the past few years, the business has been paying out quarterly dividends. These have been rising, with the latest dividend declared earlier this month of 2p, matching the past three quarters.

Forward-looking

Analysts expect the next dividend (declared in June) to rise to 2.1p per share. In June 2026, the expectation is for a further increase to 2.19p per share. So in theory, the 2026/2027 total dividend payable could be 8.76p (2.19p x 4). If I use the current share price of 75p, this would equate to a dividend yield of 11.68%.

If an investor puts £5k in Foresight stock today, this could mean that in the period in question (2026/2027), the dividends could equate to £584. But this doesn’t include the dividends that would be paid before then. If I were to assume that the dividend yield would average around 11% from now for the next five years and that an investor took the income and bought more of the stock, the passive income payments would compound even faster.

A £5k investment now with a yield of 11% would mean that in year six, an investor could receive just over £1k from dividends.

Keeping our feet grounded

Forecasting income in years to come isn’t an exact science. There are risks involved. For example, the share price could fall further, meaning that an investor would have a loss on the initial capital. This could happen if electricity prices fall. A significant portion of the firm’s revenue depends on electricity prices, which can fluctuate due to market conditions.

Even with the risks, I think it’s a high-yield opportunity that investors should consider to complement an existing income portfolio.

The post According to the dividend forecast, £5k in this income stock could eventually make £1k a year appeared first on The Motley Fool UK.

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Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended Foresight Solar Fund. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.