Companies in the UK paid out an all-time high of £36.7bn in the second quarter, according to Computershare’s latest Dividend Monitor.
This record-breaking dividend payout represents an 11.2% increase compared to last year and was largely thanks to special one-off payments.
Without these special dividends, underlying growth was a shallower 1% year-on-year, totalling £32.5bn. These more modest numbers were largely due to UK mining companies, which continued to slash their dividends for the second year running. They collectively reduced their payouts by £2bn in the second quarter.
Yet Computershare’s CEO of governance and issuer services Mark Cleland pointed out that the overall picture for UK dividends was bright. Without the mining sector, underlying growth would have been 8.6% throughout the quarter, with 16 of the 21 sectors paying higher payouts.
“Higher profits mean most sectors are paying more in dividends and spending a lot of cash on share buybacks, but fortunes diverge widely between companies and sectors, and international factors are at play and all this impacts the dividend picture too,” Cleland said.
“For the rest of the year, customarily volatile mining payouts are now likely to be even lower following a steeper-than-expected cut announced by Glencore for Q3, while buyback programmes across a variety of sectors are exerting a noticeable drag on dividends. Importantly however, the Q2 figures show that most sectors are delivering growth and we expect that to continue in the second half of the year.”
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Mining companies may have been a significant detractor during the second quarter, but UK banks were “by far the largest positive impact” as high interest rates boosted their profits.
Of the £4.1bn that was paid in special dividends throughout the quarter, £3.1bn of it came from HSBC alone – the fourth largest special dividend in UK history. Including its regular dividend, the banks paid out £9.3bn in total across the period, accounting for a quarter of all dividends during those three months.
It more than made up for laggards such as Close Brothers, which cancelled its dividends this year as it undergoes a regulatory review of its car finance loans.
Cleland said that while the “gravitational pull of mining companies on UK dividends is hard to escape,” the outlook for income investors in the UK is worth getting excited about.
“The UK economy has begun to pick up,” he said. “Wage growth is significantly higher than inflation at present which might present a headache for policymakers but does mean purchasing power is increasing after the painful squeeze in the last couple of years.”
See also: Janus Henderson: US reports record-high dividend growth in 2024
