Income must-buy lists almost never include this one — but with an 8.2% yield forecast, I think it should!
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When investors hunt for income stocks to buy, they often turn to insurers, utilities or real estate investment trusts.
But one FTSE 100 The stock – rarely discussed as an income play – quietly offers a weather yield of 7.8%.
So, how much dividend income can it make?
An overlooked dividend giant
The stock in question is NatWest (LSE: NWG). It’s a term many investors still associate with the long legacy of the financial crisis rather than reliable income.
However the modern iteration of banking is a very different animal. It is a streamlined, sales-oriented operation with strong cash reserves, streamlined cost controls, and the ability to return large sums of money to shareholders through dividends.
Another risk for a bank is that interest rates fall faster or more than expected, therefore compressing its net interest income. The margin is the difference between the interest rate received on the loan and the rate paid on the deposit. Another risk is high competition in mortgages and deposits which could pressure prices.
Drivers of income growth
NatWest’s latest results (for the year 2025) point to a number of drivers that are likely to support strong earnings growth in the coming years. And ultimately this is what makes any firm’s profits higher in the long run.
Operating profit before tax rose 24.2% year-on-year to £7.7bn, while revenue jumped 12.3% to £16.4bn. This increase was fueled by client growth, recent portfolio acquisitions and a strong wealth management arm.
For now, costs are still tightly controlled. The bank aims for a cost-to-income ratio of less than 45% by 2028 (from 48.6% in 2025 and 53.4% in 2024). And its target CET1 ratio of around 13% over that period gives it the ability to continue returning cash to shareholders.
These trends suggest that NatWest has the operational muscle to maintain growing profits – and, in turn, continue to increase its dividend.
How much dividend income can be generated?
NatWest has increased its dividend by 51% by 2025, to 32.5%. It sits well above the current FTSE 100 average of 3.1%, but the bank’s payout is forecast to rise even further.
Consensus analyst estimates are for the dividend at 35.5p this year, 39.9p next year, and 43.2p in 2028. These will yield dividend yields of 6.7%, 7.6%, and 8.2%.
So, my holding of £20,000 would earn me £25,284 in dividends after 10 years and £212,146 after 30 years. This includes a typical long-term investment cycle, starting with an initial investment of about 20 and ending with early retirement options of about 50. It also assumes an 8.2% yield as an average, although this may go down or up over time.
‘Dividend compounding’ is also factored into the numbers, as this has the effect of turbocharging dividends over time.
At the end of 30 years, my holding would be worth £232,146, including an initial investment of £20,000. And this would pay me an annual income from dividends of £19,036!
My investment idea
NatWest’s combination of consistent income, strong capital position and high yield makes it more attractive than many investors think.
The bank today is leaner, more focused and more efficient than its crisis-era name. I will be buying more shares for long-term income and I think other investors with a similar objective may want to take a closer look.
