The dividend outlook may be slightly cloudier than it once was, but UK income investors are still set fair this year.
For the FTSE 100 as a whole, headline full-year dividend payments are forecast to be flat or even slightly down on 2024, courtesy of a trio of headwinds. But the majority of the biggest payers in the index are operationally healthy and have seen their share prices flourish in the year to date.
The average 2025 total return for companies listed in the table below is 20 per cent. That has pushed down dividend yields for the group – the typical trailing yield of 4.6 per cent compares with an average forward yield of 4.2 per cent – but they remain well in advance of the 3.3 per cent offered by the index.
Even so, the factors weighing on payouts can’t be dismissed. The first is foreign exchange moves – the pound’s weakness against the greenback in the first half of the year has had an inevitable impact on the FTSE 100’s array of dollar earners. Full-year payout forecasts have been revised down accordingly, and there may be more to come in the months ahead.
The second factor is a lack of special dividends, which makes year-on-year comparisons look worse. Anglo American (AAL)’s payout upon completion of its merger with Teck Resources will not take place until 2026 at the earliest, and others are few and far between.
Then there are buybacks. Share repurchases dragged on dividend payouts last year, and their popularity has only risen since. A record £58bn-worth of repurchases were made by UK large-cap companies last year; as of the start of September, 2025’s total was already £54bn.
Many of these repurchases look justified. ‘Value’ stocks have outperformed over the past 12 months, a trend that usually goes hand in hand with outperformance by high-yielding shares. Yet analysts at Panmure Liberum say that it is now those with the highest buyback rates that are leading the way.
Its analysis shows that the top-yielding fifth of the FTSE 100 has underperformed the wider index by more than 10 percentage points over the past year. By contrast, the 20 companies with the highest buyback yields have outperformed by 16 percentage points.
So it’s a good thing that the income majors (ranked in the table below by the absolute size of their 2024 dividend payments) also tend to have enough cash on hand to buy back shares, too. Of the 20 largest companies in the table, only Rio Tinto (RIO), AstraZeneca (AZN), Diageo (DGE), National Grid (NG.) and Aviva (AV.) do not have material buyback plans in train or rolling out in the coming months.
For income investors, repurchases will be no substitute (or at best an imperfect one), for a regular and growing dividend payout. Even so, the underlying strength of these businesses stands them in good stead. There will always be sectoral peaks and troughs – this year mining dividends are dropping back, while financials continue to increase – but the overall outlook is one of resilience and even renewed optimism.
Click below to read our analysis of the income investment cases for nine of the biggest payers in the UK market.
