Expectations for dividends from London-listed companies are being scaled back after payout cuts by miners and amid a harsher outlook for oil companies.
Total dividends are expected to grow by only 3.8 per cent to £93.9 billion this year, down from a previous forecast of £94.5 billion, which would have reflected a growth rate of 4.5 per cent.
Growth will be even more pedestrian after stripping out special or one-off dividends. Underlying dividends will rise by only 0.1 per cent, according to the quarterly monitor from Computershare, the share registrars group that tracks all quoted company payouts.
Dividends from miners were likely to be even lower than expected, it said, after the dividend cut announced by Glencore, the commodities powerhouse, for the third quarter, which was larger than forecast.
The lower price of crude oil, compared with levels in 2022 and 2023, would crimp the largesse of energy companies later in the year, Computershare said. Heavy share buybacks by many listed companies, which reduce their share counts, also were said to be putting downward pressure on the total value of dividends.
Total dividends from UK-listed companies peaked at £104.5 billion in 2019, slumped in the pandemic year of 2020 and then recovered.
In the three months to the end of June, traditionally the most fruitful quarter in the dividend-paying calendar, total payouts amounted to a record £36.7 billion, up by 11.2 per cent. However, the headline number was flattered by special dividends, notably a £3.1 billion bonanza from HSBC, which distributed the proceeds from selling its Canadian business. It was the fourth biggest “special” recorded in 17 years of the survey. Removing specials, regular dividends grew by only 1 per cent in the quarter to £32.5 billion.
Miners, hit by lower commodities prices, notably of iron ore, nickel and coal, have cut their payments. Housebuilders also have done so, in response to a tougher housing market.
In contrast, strong regular dividend growth from banks and pharmaceuticals companies offset reductions in the quarter. Insurers, including Direct Line, which restored its payout, and supermarkets, also helped.
Computershare expects third-quarter payouts to total £26 billion, which would be down by 5.7 per cent. Its prediction for fourth-quarter payments of £15.7 billion would be up by 3.7 per cent.
HSBC topped the second-quarter payers’ table for the second year running. Before that, Rio Tinto had been the most generous second-quarter dividend payer for four consecutive years.
The average regular dividend yield for London-listed companies is 4 per cent. That compares with a 4.28 per cent yield on benchmark government bonds and up to 4.9 per cent from the top-paying instant access savings account.
Dividends are highly valued by pension schemes with retirement incomes to pay and by income funds bought by private investors for their yields. They also help to underpin the share prices of slower-growth and lower-risk companies bought for their yield.
“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,” Mark Cleland, 47, chief executive of issuer services at Computershare, said. “Our figures for the second quarter show that most sectors are delivering growth and we expect that to continue in the second half of the year.”