UK dividends hit a new record in the second quarter of 2024, according to data from global financial services company Computershare.
Payouts rose 11.2% year-on-year to an all-time quarterly high of £36.7bn, thanks to one-off special dividends, notably from HSBC, which distributed proceeds from its Canadian business sale. Even though the underlying growth rate, excluding these one-offs, was just 1.0%, regular payouts still set a new record at £32.5bn.
A second consecutive year of cuts from mining companies, amounting to £2.0bn in Q2 and reducing the sector’s payouts by a third year-on-year, resulted in a slow underlying growth rate. This trend concealed strength across various sectors. Excluding the mining sector, the underlying increase in dividends was 8.6% in Q2, with 16 out of 21 industry sectors seeing higher dividends. At the company level, the median growth rate in per-share dividends was 5.4%.
Europe contributed two-fifths to record global dividends in 2023
Mark Cleland, CEO of Issuer Services, UCIA at Computershare, said: “The UK economy has begun to pick up. Wage growth is significantly higher than inflation at present, which might pose a headache for policymakers, but it does mean that purchasing power is increased after the painful squeeze during the last couple of years. Higher profits mean most sectors are paying more in dividends and spending a lot of cash on share buybacks, although this might not be obvious given that the gravitational pull of mining companies on UK dividends is hard to escape. Our figures for Q2 show that most sectors are delivering growth, and we expect that to continue in the second half of the year.”
Banks made the largest positive impact on dividends, distributing £1.1bn more in regular dividends compared to the second quarter last year, as high interest rates continue to support profit margins. Consequently, banks are on track to make record payouts this year.
The healthcare sector, up 25%, made the second-largest contribution to growth, driven by strong profit performances at Haleon and GSK. Other sectors showing robust growth include insurance, property, industrials, and food retail. High oil prices continued to support modestly rising dividends from major oil companies. The weakest sector was housebuilding, with lower dividends reflecting the currently tough housing market and residential sales environment.
For the rest of 2024, mining payouts are likely to be even lower following a steeper-than-expected cut announced by Glencore for Q3. This ‘mining effect’ has led the Dividend Monitor to reduce its forecast of underlying growth this year to just 0.1%, down from 1.5% three months ago, translating into total regular dividends of £88.2bn. Excluding mining companies, the forecast would indicate double-digit underlying growth this year.
Mark added: “The mining sector has helped drive faster growth for UK dividends over the longer term, but the highly cyclical nature of the industry means it has introduced much more volatility into each year’s overall UK dividend picture. In 2024, it will act as a major brake on progress: for the full year, mining dividends are likely to be more than £4bn lower than 2023, offsetting all the underlying growth contributed by the wider market.”
The report lowers its headline growth forecast to £93.9bn, down from £94.5bn, still up 3.8% year-on-year but lower than the earlier 4.5% forecast. Over the next twelve months, UK equities are set to yield 4.0%, unchanged from three months ago.
