Record first quarter for UK dividends

UK dividends reached a record high in the first quarter, growing to a total of £19.7bn.

Dividend payouts to shareholders yielded an average of 4.6% in the first quarter, with the average yield up by 15.7% to reach a near-historic high. The 4.6% excludes special dividends, and far exceeds the yield available on other asset classes like government bonds, property, and cash.

The latest quarterly dividend monitor from Link Asset Services reported large one-off payments helping to strengthen dividends in the first three months of 2019. These included miner BHP paying shareholders £1.7bn.

When looked at on an underlying basis, dividend growth was a slightly less impressive 5.5%, reaching £17.6bn.

Two-thirds of this underlying dividend growth was the result of currency fluctuations.

It means that for 2019 as a whole, dividend payouts are forecast to reach £99.7bn. This would represent 3.9% year-on-year growth, but it’s lower than the 5.3% annual growth previously predicted at the start of the year.

When special dividends are considered too, it’s possible that total UK dividends will break through the £100bn level for the first time, to reach a forecast £106.1bn in 2019, up 6.3% on last year.

The two most significant dividend-paying sectors in the first quarter were oil, gas and energy, and mining, at £4.5bn and £3bn respectively. Dividends in the mining sector were just £1.2bn in the first quarter of last year.

Other sectors experienced falls in dividend payouts during the first quarter. In the telecoms sector, total dividends paid fell from £1.6bn in the first quarter of £1.6bn, to £1.5bn in the first quarter of this year.

The retail sector was also perhaps unsurprisingly weaker at the start of this year, with dividends down from £546m to £367m.

Michael Kempe, chief operating officer of Link Market Services, said: “The first quarter is usually just the warm-up act for dividends, but this year it has put in a stellar performance. The yield on UK shares is a third higher than its long-run average and suggests equities are still extremely cheap, both in comparison to other countries and to other asset classes.

“Payouts would need to fall far more than they did even during the financial crisis to bring the UK equity yield back into line with the long-run average, and we just don't see that happening.”

To discuss this, or for investment advice on any matter, contact Kellands.

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