UK dividends hit a new record in the second quarter of 2024, according to the latest dividend monitor from global financial services company Computershare.
Payouts, which were boosted by special dividends, rose 11.2% year-on-year to an all-time quarterly high of £36.7bn.
The underlying growth rate, which strips out these one-offs, was up just 1% thanks to a large cut in mining payouts, but regular dividends still reached a new record of £32.5bn.
Excluding the weak mining sector, underlying growth came in at 8.6% in the three month period compared with the same time a year ago.
Some 16 out of 21 industry sectors saw higher payouts, with median dividend increase at company level at 5.4%.
The data revealed that banks made the strongest contribution to growth, distributing £1.1bn more in regular dividends compared to the second quarter last year, as high interest rates continue to support profit margins. The largest came from HSBC (HSBA.L) distributing the disposal proceeds from its Canadian business.
Lenders are on track for record payouts this year.
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The healthcare sector made the second largest contribution to growth, up 25%, thanks to strong profit performance at Haleon (HLN.L) and GSK (GSK.L).
Insurance, property, industrials and food retail were among the mix of sectors showing good growth. High oil prices continued to support modestly rising dividends from the major oil companies.
On the downside, the weakest sector was housebuilding, with lower dividends mirroring the currently tough housing industry and residential sales markets.
For the rest of 2024, mining payouts are likely to be even lower following a steeper-than-expected cut announced by Glencore (GLEN.L) for the third quarter.
The “mining effect” means that the dividend monitor has reduced the forecast of underlying growth this year to just 0.1%, down from 1.5% three months ago, translating into total regular dividends of £88.2bn. Excluding mining companies, the forecast would show double-digit underlying growth this year.
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Mark Cleland, chief executive of Issuer Services, UCIA at Computershare, said: “The UK economy has begun to pick up. Wage growth is significantly higher than inflation at present, which might pose a headache for policymakers, but it does mean that purchasing power is increasing after the painful squeeze during the last couple of years.
“Higher profits mean most sectors are paying more in dividends and spending a lot of cash on share buybacks, although this might not be obvious given that the gravitational pull of mining companies on UK dividends is hard to escape. Our figures for Q2 show that most sectors are delivering growth, and we expect that to continue in the second half of the year.”
The report added that it has reduced its headline growth forecast to £93.9bn (down from £94.5bn). Although this is still up 3.8% year-on-year, it is still lower than its earlier 4.5% forecast.
During the next twelve months, UK equities are set to yield 4%, unchanged from three months ago.
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