Dividend payouts in the UK were £14.2 billion in the first quarter, a 24.9% year-on-year fall on a headline basis, but with lower one-off special dividends and the departure of mining giant BHP from the UK stock market taken into account, the adjusted underlying total jumped 12.2% to £13.3 billion.
Link Group’s UK Dividend Monitor also expects headline dividends to reach £92.2 billion this year, a fall of 0.8% year-on-year. Underlying payouts, which exclude specials, are anticipated at £85.8 billion, which would be 15.2% higher than in 2021.
The biggest contribution to the first quarter increase came from a 29% jump in the oil sector. After oil dividends were cut sharply during the pandemic when crude prices crashed, oil majors are enjoying a big increase in their cash flow with a rebound in prices.
This rise has caused political controversy in the UK, with Labour leader Keir Starmer pledging to hit UK oil majors with a windfall tax on profits if elected Prime Minister.
All sectors increased underlying payouts in the first quarter. Highlights included AstraZeneca, the most valuable company on the London Stock Exchange, showing its first increase for almost a decade, the return of BT’s dividend after a two-year hiatus, and a post-Covid-19 rebound from the property sector.
Retailers also showed signs of revival with large special dividends from Next and B&M European Value, while Royal Mail’s special dividend reflected strong trading delivering internet purchases through the pandemic. However, dividends remained scarce from the still hard-hit travel and leisure industries.
Ian Stokes, managing director for corporate markets UK and Europe at Link Group, said: “2022 started as strongly as we expected, and we anticipate the rest of the year to surpass our expectations.
“There are risks to our forecast view of where dividends are heading, related to the constraint on consumer demand caused by energy price hikes here and around the world, and related to cost pressures that will weigh on margins for a number of sectors. Mid-cap companies are more likely to show any strain than the top 100.”
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