One-off payouts drive UK dividends to £15.6 billion in first quarter, but growth likely to slow

One-off special payouts helped boost dividends paid by UK listed companies to £15.6 billion in the first quarter, but growth is expected to slow this year due to weaker profit prospects.

The headline figures show dividends rose 4.9 percent to £15.6 billion in the first quarter of 2024, with 95 percent of payers increasing or keeping dividends stable, according to Computershare’s Dividend Monitor.

Underlying growth was slower, with regular dividends rising just 2 percent to £14.7 billion, while most sectors showed steady growth in the low single digits.

Britain, which dominated dividend payments last year thanks to higher interest rates, was largely absent in the first quarter, but Computershare expects the sector to be the biggest contributor for the full year.

Payments from leisure and travel companies have grown the fastest – from £22 million to £76 million in the last year – although figures are still well below pre-2020 levels.

Food, drink and tobacco was the only major sector to show growth in the total value of payments in the first quarter, helped by strong profits at Associated British Foods.

Historically dominant sectors such as healthcare, oil and telecoms all fell largely due to a stronger pound and a preference for share buybacks.

While the oil sector increased dividends per share in dollar terms, the total value of payments in the sector actually fell by 2.8 percent.

“For the full year, oil dividends are likely to remain roughly flat to slightly higher,” Computershare said.

‘A more modest 2024 for the sector removes a key driver of dividend growth from the UK market this year, having made a major contribution during the recovery from the cuts implemented early in the pandemic.

“This is not to say that oil companies don’t have significant amounts of excess capital. Oil companies, and especially Shell, have significantly shifted their emphasis to share buybacks over the past two years.”

Overall, dividend payments for the rest of the year are likely to be slower than expected thanks to the sluggish economy, although overall growth is expected to increase by 4.3 percent to £94.5 billion.

However, underlying growth is expected to rise 1.5 percent to £89.5 billion, up from 2 percent three months ago.

The prospective twelve-month return is currently unchanged at 4 percent.

Mark Cleland, CEO of Issuers Services at Computershare, said: ‘Dividends were healthy in the first quarter of 2024, but the general picture of flat or slow-growing dividends across most sectors sets the tone for the full year.

‘Only the banks and the recovering leisure and travel sector look likely to post double-digit growth this year, while only the mining sector, which is defined by the ups and downs of the commodity cycle, looks set for a double-digit decline.

‘This modest dividend growth reflects the earnings picture: cost pressures have eased for many companies, but the cost of capital has risen sharply and economic growth is sluggish at best in Britain and much of the world.’

Fund manager at Henderson High Income David Smith said: ‘While underlying dividend growth is likely to be relatively low this year, meaning moderate earnings growth, we expect things to improve in the second half of the year as cost pressures ease and interest rates warm. reduced. (especially in Britain) and economies are starting to recover thanks to real wage growth and a more optimistic consumer.’