The latest UK Dividend Monitor from Link Group found that on an underlying basis (which excludes special dividends), second-quarter payouts were 43.8% higher at £24.3bn, one sixth lower than their pre-crisis average.

In Q2 2021, around nine tenths of the increase came from companies that had cancelled dividends in Q2 2020.

The three biggest dividend-paying sectors were mining, banking and oil. Of the £8.7bn recovery in Q2 dividends year-on-year, the first two of these accounted for more than two thirds of the increase.

Link Group now expects headline dividend growth of 24.4% to a new total of £79.5bn this year. Underlying dividends, which exclude specials, are set to rise by 13.4% to £71.2bn, 3.9 percentage points or £2.7bn more than the group’s April forecast.

The second quarter compares to the low point of the pandemic in Q2 2020, providing an exceptionally favourable base as in Q2 2020 three quarters of companies cancelled or cut dividends.

A mix of dividend restorations, catch-up one-offs and timing changes, alongside regular annual increases for companies that have traded well through the crisis all worked in the second quarter’s favour and delivered a stellar bounce-back.

Mining dividends made up a quarter of the Q2 total at £6.3bn, thanks in particular to Rio Tinto. Banks remained under Prudential Regulation Authority (PRA) constraints the second quarter, but they nevertheless distributed £3.4bn between them, with HSBC the largest contributor.

A crucial part of the strength in Q2 reflects timing factors. For example, BAE Systems was among a significant number of companies which returned to its usual schedule of paying a second-quarter dividend, having paid late in 2020.

The bounce-back was fastest for mid-caps, reflecting the greater decline they suffered in 2020. The prospective 12-month yield on UK plc shares rose to 3.2% compared to its April 2021 level.

Ian Stokes, managing director of corporate markets UK and Europe at Link Group, said: “We have regularly cautioned over the last year that dividend patterns will be very noisy as we move through the recovery phase. This will make for choppy waters in the months ahead, but it does not mean we are pessimistic. Far from it.

“As normal life returns to Britain’s streets, so it is returning to business too. All the indicators of economic growth look very encouraging, and companies have come out of the crisis in most cases with their balance sheets looking strong. Resurgent profits and healthy bank balances mean more dividends for shareholders. These wider trends also help explain why the regulator has lifted the embargo on dividends from capital-rich banks.

“Before the pandemic, dividends reached £100.3bn, even before one-off special payouts were added, so the recovery has a way to run.”