UK dividends fell sharply in the third quarter of 2024, dropping to £25.6 billion, down 8.1% compared to the same period last year, according to Computershare’s latest Dividend Monitor report.
The decline marked the lowest Q3 dividend level since 2020, driven by cuts in the mining sector, a stronger pound, reduced one-off special dividends, and increased share buybacks.
The mining sector played a major role in the decline, with payouts down by £2.6bn compared to Q3 2023. This sector alone reduced overall market dividends by 10%, making it difficult for other industries to compensate. Banking dividends remained flat, while the oil sector showed stalled momentum. In contrast, the pharmaceutical and industrial sectors provided some positive contributions, though not enough to offset the broader decline.
Regular dividends, excluding one-off specials, were £25.3bn, down 3.5% on a constant-currency basis. At the company level, median growth in dividends was a more encouraging 4.5%, indicating that many firms outside the top 100 posted better underlying growth.
Mid-cap companies outperformed their larger counterparts, with underlying growth of 3.6% compared to a -4.4% decline for the top 100 firms. This reflects mid-caps’ greater sensitivity to the UK’s resilient economy during the first half of 2024.
UK dividends reached record high in Q2
Derren Nathan, head of equity analysis at Hargreaves Lansdown, commented on the Computershare Dividend Monitor, noting a drop in UK dividend payments in Q3, with mid-caps outperforming. However, ongoing share buyback activities among large firms distort the data. Despite this, the FTSE continues to offer strong, sustainable yields, with Shell, Lloyds and Centrica being notable examples, he cited.
Looking ahead, Computershare has revised its 2024 forecast, now expecting UK dividends to reach £92.3bn, up 2.0% on a headline basis. However, regular dividends are forecasted to decline slightly, with a 0.3% drop to £86.8bn. Over the next 12 months, UK equities are expected to yield 3.7%.
On the findings, Clive Beagles, senior fund manager for J O Hambro’s UK Equity Income Fund, commented: “In addition to the points they make, there were also several companies who shifted their “ex” date from late September to early October, for example, Phoenix Group. This magnified the fall in Q3 vs last year. Conversely, it will boost the growth rate of Q4 2024 vs the Q4 2023 figure. From the start of this year, we have been highlighting that we anticipated a “flattish” outturn for dividend growth in 2024; however, the risk to that number is now slightly to the upside (c.+1-2%). In 2025, we expect a marked acceleration in dividend growth towards the Fund’s long-term average ( c+9% p.a.).”
