In the second quarter of 2024, UK dividends reached a new record, according to Computershare’s latest dividend monitor. Total payouts, bolstered by special dividends, increased by 11.2% year-on-year, hitting an all-time quarterly high of £36.7bn. The underlying growth rate, excluding one-off payments, saw a modest rise of 1% due to significant cuts in mining payouts, although regular dividends still set a new record at £32.5bn.
Without considering the weakened mining sector, underlying growth for the quarter was 8.6% compared to the same period last year. Sixteen out of twenty-one industry sectors experienced higher payouts, with the median dividend increase at the company level at 5.4%. Banks made the most substantial contribution to growth, distributing £1.1bn more in regular dividends than in the previous year, supported by high-interest rates. HSBC led the way with the largest payout, following the disposal of its Canadian business.
The healthcare sector followed, with a 25% increase in dividends due to strong performances from Haleon and GSK. Other sectors showing robust growth included insurance, property, industrials, and food retail, while high oil prices continued to support rising dividends from major oil companies. Conversely, the housebuilding sector saw the weakest performance, with dividends reflecting the challenges in the housing market and residential sales.
Looking ahead, mining payouts are expected to decrease further following a steeper-than-anticipated cut from Glencore for the third quarter. This “mining effect” has led the dividend monitor to reduce the forecast of underlying growth for the year to just 0.1%, down from 1.5% three months ago, translating into total regular dividends of £88.2bn. Without the impact of mining companies, the forecast would indicate double-digit underlying growth.
Mark Cleland, CEO of Issuer Services at Computershare, remarked that the UK economy is showing signs of improvement, with wage growth outpacing inflation, which could increase purchasing power despite potential challenges for policymakers. He noted that most sectors are enjoying higher profits, leading to increased dividends and share buybacks, even if the influence of mining companies on UK dividends is significant. The figures for Q2 demonstrate growth across most sectors, expected to continue in the year’s second half.
The report also mentioned a reduction in the headline growth forecast to £93.9bn, down from £94.5bn. While this represents a 3.8% year-on-year increase, it falls short of the earlier 4.5% forecast. Over the next twelve months, UK equities are projected to yield 4%, unchanged from the previous three months.
The record-breaking dividends in the UK for Q2 2024 highlight a generally positive economic trend, with many sectors showing robust growth. However, the significant impact of the mining sector’s downturn has tempered overall growth forecasts, underscoring the varied landscape of the UK’s dividend performance.
Fidelity Special Values PLC (LON:FSV) aims to seek out underappreciated companies primarily listed in the UK and is an actively managed contrarian Investment Trust that thrives on volatility and uncertainty.
