Dividends to hit a record high: Shareholders to pocket £86bn in 2023

Dividend payments look set to reach an all-time high next year, a welcome boost for investors following the turmoil in the financial markets.

According to a City report, payouts from FTSE 100 companies will total £85.8 billion by 2023. This is an 8 per cent increase on the £79.1bn paid out to shareholders this year.

The projected total for 2023 would be the highest ever and above the low of a Covid pandemic of just £61.8 billion.

A rise in dividends, predicted in a report by AJ Bell, would be welcomed by savers who have tied up their money in the stock markets through pensions and other investments.

Dividends are a vital source of income for the UK’s largest pension funds and for individual savers who depend on the payouts, particularly when they retire.

A rise in dividends after the carnage of the pandemic would be especially welcome at a time when double-digit inflation is hammering living standards.

AJ Bell’s investment director Russ Mold said: ‘Analysts expect 2023 to simply set a new record for FTSE 100 common dividend payments, even if earnings growth is expected to slow and then come to a complete halt in 2024.’

Dividends plunged to a low of £61.8bn in 2020 during the coronavirus crisis – the lowest point since 2013 – as the biggest payers like BP and Shell cut or stopped payments.

The Bank of England has imposed a temporary ban on shareholder payouts from big money lenders during the pandemic over fears bad loans could wipe out bank balance sheets.

The central bank scrapped nearly £8bn in dividends for FY 2019 and suspended dividend payments throughout 2020.

Even FTSE 100 heavyweights HSBC and Lloyds only started paying dividends in the first half of 2021.

However, AJ Bell expects payments to rise over the next few years to a whopping £90.9bn by 2024, surpassing the pre-pandemic peak of £85.2bn achieved in 2018.

Oil and gas companies are expected to drive the increase.

Shell is on course to become the largest dividend-paying stock in the FTSE 100 by 2022, with Glencore, Rio Tinto and British American Tobacco close behind.

The oil giant paid a whopping £6 billion in dividends this year.

Miner Glencore followed suit, increasing its dividend by more than any other FTSE 100 company in 2022, increasing payments by more than £3 billion to a total of £5.7 billion. Analysts have nevertheless warned that miners’ dividends could be hurt in coming years by declining demand for metals.

AJ Bell expects just ten stocks to pay dividends worth £42.8 billion, or 54 per cent of the forecast total for 2022. The top 20 are expected to generate 72 per cent of the index’s total payout, at £57 .3 billion.

Mold added: “Anyone who believes the UK stock market is attractive in terms of returns should have a good understanding of, and strong views on, those 20 names in particular.”