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UK dividend payouts soar to £34.9bn in third quarter

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Dividends from UK-listed companies rose by 89 per cent year-on-year in the third quarter to £34.9bn.

The latest UK Dividend Monitor from Link Group said “large one-off special dividends” were partly responsible for the increase, but even the underlying total – which excludes special payouts – jumped sharply, up 52.6 per cent to £27.7bn.

The third quarter results are set against a pandemic-struck Q3 2020, during which payouts halved.

The three biggest dividend-paying sectors were mining, oil and banking.

Mining dividends quadrupled year-on-year to £12.8bn. According to Link Group, by the end of the year miners will be responsible for nearly £1 in every £4 distributed by UK-listed companies.

Meanwhile, a very sharp rebound in oil prices enabled oil payouts to recover more quickly than expected and banking dividends were restored, having been banned during the same period last year. They still remain well below pre-pandemic levels.

Almost all sectors saw an increase in payouts but those in the consumer discretionary group saw a wide divergence between companies restoring dividends and those still unable to pay. For example, most travel and hospitality companies paid nothing, while some general retailers and industrials bounced back and others stayed on the side-lines.

Link Group now expects headline dividend growth of 44.8 per cent to a new total of £93.2bn this year. Underlying dividends, which exclude specials, are set to rise by 22.4 per cent to £77.4bn. Of the nine-percentage-point underlying-growth upgrade, more than seven tenths is due to the mining boom.

Ian Stokes, managing director, corporate markets UK and Europe at Link Group, said: “The good news is that we have consistently seen companies deliver more in dividends than we thought likely at the beginning of the year in the depths of the UK’s longest, strictest lockdown.

“Now almost the whole economy here and in most developed countries is open for business, even if supply chains are in a mess. Moreover, companies were progressively less impacted by each lockdown and many of them took action to bolster their balance sheets during 2020, either with new borrowing, new equity issuance, or cost-cutting (including dividends!). Dividend firepower is now much stronger as a result.”

He added: “The boom in special dividends reflects how some companies are making catch-up payments, some are capitalising on very strong demand, and others are seizing the moment to sell assets at a time of high prices and numerous cash-rich potential buyers.

“The mining sector raises an amber warning, however. Commodity prices have come down sharply recently which makes it likely their dividends will be lower next year. With banks returning to strength and other sectors continuing to recover we still expect growth in 2022, but dividends will face headwinds rather than enjoy 2021’s strong, but blustery following breeze.”

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