UK Dividends Surge as Year End Approaches

Link upgrades forecasts for 2021 income payouts from UK companies, but 2022 may be heavier going

James Gard 25 October, 2021 | 1:16PM
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UK pound notes

The latest dividend report from Link underlines the strong recovery in UK dividends from 2020’s crisis, with income from UK plc in the third quarter nearly 90% higher than a year ago. Special dividends accounted for the bulk of this increase, but without them the level of income paid out to UK shareholders was more than 50% higher. With the end of the year approaching, Link has upgraded its 2021 forecast but dividends paid out by UK companies this year are expected to fall short of pre-pandemic levels after a bruising reset last year.

In its overview of UK income, Link says dividends in the last quarter reached nearly £35 billion, or £27.7 billion excluding special dividends. The biggest contributors in the last three months were the mining, oil and banking sectors. Booming commodity prices this year have helped resources companies generate billions in spare cash for shareholders, while UK banks have been able to restart payouts after a regulatory freeze in 2020. Mining companies were central to this strong recovery, accounting for nearly £1 in every £4 paid out, according to Link. In Q3, mining companies paid out £23 billion, more than the next five sectors combined. One of these companies paying an outsized special dividend was BHP (BHP). The company, which is planning to shift its primary listing from London to Australia, is expected to pay out $15 billion to shareholders in this financial year. IN Q3 this year, the top dividend payers by overall payout were Rio Tinto, BHP and Anglo American, but this time last year the top three was Rio, British American Tobacco and National Grid – looking further back, Shell, Vodafone and HSBC were in the top slots five years ago.

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James Gard  is content editor for Morningstar.co.uk