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Using dividend forecasts can be a great tool when trying to weigh up a potential investment opportunity. Based on data and analyst viewpoints, changes in dividends for the coming years can help assess the sustainability of the income going forward. When I spotted the forecast for this FTSE 250 stock, I decided to research it further.
Income growth expected
I’m referring to Harbour Energy (LSE:HBR). The UK-based independent oil & gas producer has a current dividend yield of 9.43%, with the share price down 26% in the last year.
It primarily makes money from selling oil and natural gas. Simply put, the more it produces, and the higher the commodity prices, the more revenue it makes. In terms of dividends, Harbour has been consistent in declaring and paying out income. For the past few years, it has paid out cash to shareholders and has an annual dividend policy (like a $455m total payout in 2025).
The business made a major acquisition of Wintershall Dea’s non-Russian upstream assets last year, which substantially increased its scale, reserves, and production base. Looking ahead, the financial benefits of this should be reflected in higher dividends.
In the past year, the total dividend per share payments totalled $0.26. This comprises two usual dividends, an interim and a final one. This schedule is unlikely to change looking ahead. For 2026 the total dividend is expected to grow to $0.27, with the 2027 figure forecast at $0.29.
Of course, we don’t know where the share price will be in the future for the yield calculations. However, if I assume the current price and factor in the exchange rate, the dividend yield could rise to 10.38%.
Noting the volatility
As a commodity stock, the price action can be volatile. The 26% drop in the past year is evidence of this. One reason for the move was heavy windfall taxes imposed by the UK government. The UK Energy Profits Levy has had a significant impact on Harbour. Even while pre-tax earnings were solid, in March it reported a tax bill of $1.31bn!
The windfall tax regime has created uncertainty and reduced investor confidence. The fact that the tax is extended to 2029 (and may even be increased) amplifies concern going forward.
Aside from that, oil prices have fallen over the past year. Even though this impacts the whole sector and not just Harbour Energy, it’s still a contributing drag on the stock.
Dividend dilemna
The forecast for the dividend does look attractive. However, if the share price keeps falling, it could wipe out all of the benefits of the income. Therefore, it’s a question of whether the high-risk nature of the business is worth it for a potential 10%+ yield. I don’t feel it’s worth the risk for my own protfolio, but it’s a decision for each investor to make.
