Three dividend growth shares UK investors should watch into 2027

NatWest, Bellway and Lloyds Banking Group are among the dividend growth shares UK income investors have been eyeing most closely, with each forecast to raise payouts by 10% to 20% annually over the next three years. The combination of above-market yields and improving earnings coverage makes the thesis straightforward; the question is what breaks it.

NatWest: the highest-return case

NatWest Group (NWG) raised its total 2025 dividend by 51% to 32.5p per share, comprising a 9.5p interim and a 23.0p final, according to the NatWest Group 2025 Annual Report and Accounts. Profit attributable to ordinary shareholders rose to £5,479 million from £4,519 million in 2024.

Return on tangible equity came in at 19.2% for 2025, up from 17.5% the prior year, already ahead of the group’s own guidance of above 17% for 2026 and over 18% by 2028. The CET1 ratio closed 2025 at 14.0%, up from 13.6% a year earlier, and capital generation pre-distributions reached 252 basis points.

Total income for 2025 was £16.4 billion, up 12% year-on-year, with guidance for 2026 set at £17.2 billion to £17.6 billion, as reported by Yahoo Finance. Analyst forecasts project dividends of 29p in 2025, 32.7p in 2026 and 36.5p in 2027, implying a forward yield approaching 7% by 2027.

JPMorgan expects NatWest to shift to a 50% ordinary dividend payout policy from 2026, versus a 40% consensus, which would support an 8% cash yield and roughly 11% total yield. The £750 million on-market buyback announced with the full-year 2025 results is due to begin in the first half of 2026; total distributions charged to capital in 2025 reached £4.1 billion, per Reuters wire reporting. The principal risk is a faster-than-expected decline in UK interest rates, which would compress RoTE and tighten dividend headroom.

Bellway: dividend growth in a recovering sector

Among dividend growth shares UK mid-cap investors follow, Bellway (BWY) carries one of the cleaner profiles in the FTSE 250. Forecasts show the payout rising from 70p in 2025 to 78p in 2026 and 93.9p in 2027, representing 10% to 20% annual growth, lifting the yield from 2.6% to around 3.8% over the period.

Earnings are expected to grow 15% in 2026 and 21% in 2027, keeping payout coverage at roughly 2.5 times. If earnings sustain approximately 20% annual growth, return on equity could reach 8.2% within three years. The risks are real: elevated mortgage rates and construction cost pressures are squeezing margins across the sector, and if those conditions persist, the dividend trajectory softens. What provides some reassurance is coverage ratios that leave reasonable room for an earnings miss before the dividend itself comes under pressure.

Lloyds: progressive income with improving capital buffers

Lloyds Banking Group (LLOY) declared an actual FY2025 total ordinary dividend of 3.65p per share, up 15% from 3.17p in 2024, according to the Lloyds Banking Group investor relations page. The snippet’s forward estimate of 3.59p was a projection made before the result was declared; the confirmed FY2025 outturn of 3.65p is higher. The final ordinary component was 2.43p per share.

Analyst forecasts carry the dividend to 4.29p in 2026 and 4.84p in 2027, lifting the yield from around 4.3% to 5.7%, well above the FTSE 100 average of 3% to 4%. Earnings per share are expected to nearly double from around 6p today to 11p by 2027, keeping coverage ample. Lloyds also announced a buyback of up to £1.75 billion to be completed by 31 December 2026, bringing total 2025 capital returns to up to £3.9 billion, per dividend history data compiled by ExDividendDate.

The capital position has strengthened materially. The pro-forma CET1 ratio at end-2025 was 13.2% after dividend and buyback accrual; by Q1 2026 it had recovered to 13.4%, according to the Q1 2026 Interim Management Statement. The Board targets approximately 13.0% by end-2026, against a regulatory requirement of approximately 12%. For 2026, the group guided net income of approximately £14.9 billion and a cost-to-income ratio below 50%. RoTE guidance for 2026 stands at greater than 16%, up from 12.9% recorded for the full year 2025. The CET1 floor is the dividend’s main guardian: a severe UK downturn that pushed the ratio toward the regulatory minimum would force the bank to conserve capital rather than pay it out.

Dividend growth shares UK portfolios: the twelve-month setup

All three stocks combine yields above the FTSE 100 average with 10% to 20% dividend growth forecasts, making them credible dividend growth shares for UK income portfolios with a three-year horizon. The next test for NatWest is whether JPMorgan’s 50% payout call is validated at the 2026 interim results. For Bellway, the autumn trading update will reveal whether margin pressure is easing. For Lloyds, the end-2026 CET1 print is the number to watch.