Ithaca Energy (LSE: ITH) is drawing serious attention from income investors thanks to a dividend forecast that comfortably outpaces the wider FTSE 100 average yield of 3.03%.
The company is one of the largest independent oil and gas producers operating in the UK North Sea, with interests spanning major fields including Rosebank.
Ithaca’s portfolio was significantly strengthened following its transformational combination with Italian energy company Eni’s UK upstream operations, enlarging its production base considerably.
The company produces and sells oil and gas, with a stated objective of returning a substantial portion of the resulting cash to shareholders through dividend payments.
Shares have climbed roughly 27% over the past year, driven in part by elevated oil prices linked to conflict in the Middle East, alongside improved operational execution across its North Sea assets.
Production averaged 119,000 barrels of oil equivalent per day across 2025, before finishing the year at approximately 148,000 barrels per day, demonstrating strong momentum heading into 2026.
That momentum has continued, with production averaging 128,000 barrels per day in the first half of 2026, according to results released on 19 August.
On the dividend front, Ithaca returned $500m to shareholders for 2025 and has since raised its 2026 dividend guidance to a range of $500m to $530m, signalling growing confidence in its cash generation.
The current dividend yield stands at 8.42%, with a projected dividend per share of $0.302 for next year translating to a forecast yield of 8.44%, assuming the share price holds at current levels.
Rather than committing to a fixed dividend regardless of market conditions, Ithaca targets shareholder returns of between 20% and 35% of post-tax cash flow from operations, with 30% targeted specifically for 2026.
This flexible approach means distributions can adjust in line with commodity prices and cash generation, offering a degree of structural resilience that pure fixed-dividend models do not provide.
The company also holds almost $1.6bn of available liquidity and carries low debt levels, which provides a meaningful buffer against short-term commodity price swings or unexpected operational costs.
However, risks remain material and investors should weigh them carefully before committing capital to the stock at current valuations.
Predicting future dividend payments is inherently uncertain, and the actual yield could shift significantly if the share price moves or if the company encounters unplanned higher costs that reduce available cash for distributions.
UK politics represents a particularly notable risk, given that the North Sea has faced repeated rounds of changes to taxation and regulation, leaving Ithaca directly exposed to any further shifts in government policy.
Despite these risks, the combination of strong production growth, rising dividend guidance, flexible shareholder return targets, and a robust liquidity position presents a compelling case for income-focused investors to consider ITH shares.