The record payouts were boosted by special dividends, but when looking at the underlying growth rate which excludes these, this stood at 1%.
This was due to big cuts – the second consecutive year – in mining payouts which totalled £2bn. Excluding the weak and volatile mining sector which “concealed strength across a variety of sectors”, underlying growth was 8.6% in Q2 compared with Q2 2023.
And regular payouts set a new record of £32.5bn in the quarter.
According to the Dividend Monitor from global financial services company Computershare, banks dealt out £1.1bn more in regular dividends compared to Q2 last year. It noted that the largest of these came from HSBC distributing the disposal proceeds from its Canadian business.
It added that the high interest rates continued to support profit margins, with banks on track to make record payouts this year.
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And overall, growth was “broad-based”, with 16 out of 21 industry sectors seeing higher payouts. The median dividend increase at company level was 5.4%, the data revealed.
The healthcare sector (up 25%) made the second largest contribution to growth, with strong profit performance at Haleon and GSK.
Meanwhile, insurance, property, industrials and food retail were among the mix of sectors showing good growth. High oil prices continued to support modestly rising dividends from the major oil companies.
On the flip side, the weakest sector was housebuilding, with lower dividends mirroring the currently tough housing industry and residential sales markets.
‘Most sectors delivering growth’
For the rest of 2024, mining payouts are likely to be £4bn lower than last year following a steeper-than-expected cut announced by Glencore for Q3. The ‘mining effect’ means that the Dividend Monitor has reduced the forecast of underlying growth this year to just 0.1%, down from 1.5% three months ago, which equates to total regular dividends of £88.2bn.
Excluding mining companies, the headline growth forecast stands at £93.9bn (down from £94.5bn): still up 3.8% year-on-year. However, it is still lower than its earlier 4.5% forecast. During the next 12 months, UK equities are set to yield 4%, unchanged from three months ago.
Mark Cleland, CEO of issuer services, UCIA at Computershare, said: “The UK economy has begun to pick up. Wage growth is significantly higher than inflation at present, which might pose a headache for policymakers, but it does mean that purchasing power is increasing after the painful squeeze during the last couple of years.
“Higher profits mean most sectors are paying more in dividends and spending a lot of cash on share buybacks, although this might not be obvious given that the gravitational pull of mining companies on UK dividends is hard to escape. Our figures for Q2 show that most sectors are delivering growth, and we expect that to continue in the second half of the year.”
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