Investors in UK firms have been paid £1 billion less in dividends in the third quarter of 2025 compared to 12 months ago as big firms make cuts.
UK firms paid their investors a total of £24.6 billion in Q3 2025, down 1.4% from the £25.6 billion paid out in the same period last year, according to Computershare’s latest dividend monitor report.
The smaller payouts are due to a decline in special dividends. Cuts in special dividends from five of the UK’s top companies put a particularly large downward pressure on dividend growth, lowering it by 5.7 percentage points.
Sign up to Money Morning
Don’t miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don’t miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The lowest paying sectors for dividends
The mining sector in particular was to blame for the drop in overall payments – dividend reductions at Rio Tinto, Glencore, and Anglo American cut payouts by £711m in Q3, equal to 2.9 percentage points off total Q3 growth.
Meanwhile, Vodafone halved its dividend, Burberry suspended payments, and Berkeley opted instead to use the cash for share buybacks.
This final reason is a significant factor in Q3’s slowing dividend growth. Computershare found around 160 companies currently have active share buyback programmes, with some being sizable. Shell and HSBC, the UK’s two largest dividend payers, bought back around 6% of their shares in the last year.
Shell spent around twice as much on share buybacks than it did on dividends in the last 12 months, according to Computershare – before the pandemic the opposite was true by a wide margin.
This being said, dividends are still seemingly in vogue in 17 of the 21 sectors analysed by Computershare, while 80% of UK companies either raised or maintained their payouts.
Across the wider market, median per-share dividend growth was a modest 3%, but there were some standout firms in the quarter.
Computershare singled out Rolls-Royce, which made the largest positive contribution to overall dividend growth for the second consecutive quarter, boosting Q3 payouts by 1.5 percentage points. No wonder it was one of the top stocks bought by retail investors in September.
In the banking sector, NatWest was also a standout after it raised its dividend by more than half following strong earnings growth. Lloyds also made a large increase.
Will investors get more from UK dividends next quarter?
Following poor dividend growth in Q3, investors may need to brace for another disappointing quarter as Computershare says its outlook for Q4 has worsened.
It now projects underlying dividend growth of 2.5% for the full year of 2025, down 30 basis points from Computershare’s projection just three months ago of 2.8%.
This is thanks to a greater drag from share buybacks, slower median dividends growth, and new cuts in the pipeline. If the projection is correct, the total regular dividend yield for 2025 would be £84.7 billion.
What is more, as one-off special dividends have been unusually rare this year, Computershare has lowered their Q4 forecast for them.
This means the firm only expects special dividends to total £2.5 billion in 2025, down £2.7 billion from the £5.2 billion in special dividends paid out in 2024.
Mark Cleland, chief executive of issuer services at Computershare, said: “We are seeing some further cuts for Q4, and little prospect of higher payouts from global multinationals like those in the oil sector.
“The combined effect of widely reported falls in business and consumer confidence, sticky inflation and high market interest rates also make for a challenging economic backdrop for domestically-focused companies.
“In addition, companies are diverting a lot of cash to share buybacks, and this is a significant factor slowing dividend growth – around 160 companies now have active programmes, and some are very sizable.
“All this adds up to a projected unusual second consecutive annual decline in dividends for 2025, leaving payouts a long way short of the pre-pandemic highs.”
Top dividend stocks to watch
Amid a weakening dividend atmosphere, there are still some stocks that UK investors can rely on for reliably good payouts. Chris Beauchamp, chief market analyst at IG, highlighted three dividend stocks for investors to watch.
HSBC
HSBC announced it would pay out 7.356p per share in dividends on 18 July.
Beauchamp said: “HSBC has rebuilt its reputation as a dependable income stock, steadily lifting dividends over the past five years. Strong profits and capital discipline mean payouts are well-covered, supported by stable earnings from Asia and the UK. Investors get a solid and sustainable income stream without excessive risk.”
Aviva:
Insurance firm Avia is also a dividend stock Beauchamp is keeping tabs on. The firm announced it would pay 13.1p per share in dividends on 9 January.
He said: “Aviva’s streamlined business and strong cash generation have powered consistent dividend growth. The insurer’s payouts are well-covered and backed by healthy capital reserves, offering a dependable and sustainable source of income among FTSE 350 peers.
Sainsbury’s:
Supermarket giant Sainsbury’s is Beauchamp’s final dividend stock to watch. This is thanks to its “steady dividend growth, supported by resilient trading and strong cash flow.”
He adds: “Its payout is well-covered and underpinned by efficiency gains and solid grocery demand, providing reliable income with scope for further growth.”
Sainsbury’s declared it would pay 9.7p per share in dividends on 17 April.
