UK dividends fall as miners cut payouts

UK corporate dividends fell in the third quarter of 2024 as the traditionally generous mining sector cut payouts.

Total dividends fell 8.1 percent year-on-year to £25.3 billion in the three months ended September, according to the latest Dividend Monitor published by financial services firm Computershare.

It was the weakest third quarter for dividends since 2020, when Covid-19-related cuts led companies to scale back shareholder payouts to preserve cash.

Mining companies paid £2.6 billion less during this period, partly because falling commodity prices hit the profits of groups such as Antofagasta and Anglo American.

However, Computershare said the decline was mainly due to Glencore making cuts to fund its £5.6 billion acquisition of Teck Resources’ steel-coal business.

Furthermore, it attributed the overall fall in dividends to ‘meager’ one-off special dividends, large share buyback programs and the ‘rapid strengthening’ of the pound.

The value of sterling has risen significantly against the US dollar and the euro over the past year as the Bank of England has kept interest rates at high levels for extended periods.

Mark Cleland, Computershare’s chief executive of issuer services for Britain, South Africa and Ireland, noted that around two-fifths of UK dividends are declared in US dollars.

Cleland added that his company’s dividend figures were “much more encouraging than the figures suggest when you look beyond the generally volatile mining sector and take into account factors such as exchange rates and one-off special dividends.”

Of the 21 industries measured in the survey, 17 increased payouts, while about 75 percent of companies increased or kept their dividends stable.

At the same time, four industries reported paying 9 percent more in total dividends: industrials, consumer discretionary, information technology, healthcare and pharmaceuticals.

Rio Tinto was the largest dividend payer in the third quarter, followed by oil giant Shell, National Grid, HSBC Holdings and British American Tobacco.

Collectively, these five companies distributed £7.5 billion to shareholders, equivalent to 29 percent of all dividends paid.

Computershare expects UK listed companies to pay £92.3 billion in nominal dividends in 2024, a 2 percent increase on the previous year.

It had previously forecast a 3.8 percent increase but partially curtailed it due to the impact of exchange rates and share buybacks.

Cleland added: ‘Share buybacks allow companies to return excess cash to shareholders, but with fewer shares outstanding the overall cost of providing dividends is lower.

“This is not necessarily bad news, as buybacks mean additional money reaches shareholders, albeit in a different way.”