UK companies paid out £92.1 billion in dividends in 2024, up 2.3% year-on-year on a headline basis, according to the latest Dividend Monitor from Computershare.
The headline growth was boosted by a surge in one-off payments of £5.6 billion.
However, the data showed the underlying total – excluding one-offs – fell 0.4% to £86.5 billion in 2024, following a £4.5 billion drop in payouts from mining companies, which was the largest dividend paying sector between 2021 and 2023.
The only other sector outside mining to see a significant reduction was housebuilding, which was particularly affected by cuts from Persimmon and Bellway. In contrast, banks, insurance companies and food retailers were among the sectors to make the strongest positive contributions.
Overall, 17 out of 21 sectors and 77% of companies saw dividends rise or hold steady year-on-year, the financial services group said.
Looking ahead, Computershare said the outlook for 2025 dividends is “relatively muted.” It expects median dividend growth per share of 4-4.5% to continue, but the market total will likely not reflect this, given the announcement of some large cuts. It forecasts payouts to reach £92.7 billion at the headline level this year, with the underlying total set to rise 1% to £88.2 billion.
Mark Cleland, CEO issuer services UK, Channel Islands, Ireland and Africa at Computershare, said: “It is worth highlighting that dividend growth was better outside the highly cyclical mining sector. In addition, share buybacks are having an impact, diverting an estimated £42-45 billion of cash in 2024 to shareholders that might previously have been paid mostly in dividends.
“Even so, the report’s predicted 4-4.5% typical company dividend growth for 2025 is modest in the context of UK inflation at 2.5% and will be impacted again by some notable cuts in the year ahead. The report indicates that sharply rising borrowing costs will affect government finances, economic growth, business investment, profit margins and consumer spending. These higher market interest rates will likely have an impact on the ability of companies to generate cash for shareholders.”
David Smith, portfolio manager at Henderson High Income Trust, commented: “While at the headline level dividend growth from the UK market in 2024 looks lacklustre, this has been distorted by the large cuts to dividends in the volatile mining sector. Dividend growth excluding this sector was 4.0% which is reasonable given the uncertain economic outlook.”
Smith said the impact of the UK Budget is likely to curtail dividend growth for some domestic businesses as the increase in National Insurance and minimum wage impact corporate margins.
“However, one must remember that 75% of the UK market’s revenues are derived overseas where the global economy is improving. Additionally, the outlook for dividends in the banking sector is robust, especially in an environment of higher for longer interest rates, while the negative impact from dividend cuts in the mining sector is coming to an end. The trend for companies to buy back their shares with excess cash at the expense of special dividends continues, however, underlying dividend growth next year should be supported by international earners and banks, while dividend cover for the UK market in aggregate is health,” he added.
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