UK dividends soared in the thrid quarter to £34.9 billion, driven mainly by mining, oil and banking dividends.
On a headline basis, dividends rose by 89.2% year-on-year, while the underlying total – which excludes one-off special dividends – rose 52.6% to £27.7 billion, according to the latest UK Dividend Monitor from Link Group.
However, despite the strong rebound in the latest quarter, only five sectors have paid out more year-to-date than the same period in 2019.
The top five paying companies were Rio Tinto, BHP, Anglo American, Pennon and Royal Dutch Shell, which accounted for 39% of the total dividends paid in Q3 2021.
This quarter is set against the pandemic-hit Q3 in 2020, when payouts halved. Link Group said that the large rebound in the latest quarter has not restored dividends to full strength, as this year’s forecast headline total of £93.2 billion will not exceed 2018’s full-year £102.1 billion total.
Ian Stokes, managing director, corporate markets UK and Europe at Link Group, said that forecasting the rebound for UK payouts has been difficult as the recovery is “uneven”.
Mining dividends quadrupled year-on-year to £12.8 billion which means the sector’s Q3 payouts outpaced the next five biggest sectors combined. For the full year, miners will be responsible for nearly £1 in every £4 distributed by UK-listed companies.
Stokes said that the mining sector raises an “amber warning”, as commodity prices have come down sharply. He says this will likely result in lower dividends next year.
A very sharp rebound in oil prices is also enabling oil payouts to recover more quickly than expected. Banking dividends made a very large contribution to growth in Q3 too. Last year the sector was banned from paying out dividends and its impact can still be felt as payouts remain well below pre-pandemic levels.
The consumer discretionary group saw a wide divergence between companies restoring dividends and those still unable to pay. Most travel and hospitality companies paid nothing, while some general retailers and industrials bounced back, and others stayed on the side-lines.
“The good news is that we have consistently seen companies deliver more in dividends than we thought likely at the beginning of the year in the depths of the UK’s longest, strictest lockdown,” said Stokes.
“With banks returning to strength and other sectors continuing to recover we still expect growth in 2022, but dividends will face headwinds rather than enjoy 2021’s strong, but blustery following breeze,” added Stokes.
© 2021 funds europe
