Home Money Extraordinary payments lift UK dividends to £15.6bn in Q1, but growth likely to slow

Extraordinary payments lift UK dividends to £15.6bn in Q1, but growth likely to slow

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Flying high: Airline, travel and leisure companies saw the fastest growth in the first quarter
  • Dividend payments grew 4.9% in the first quarter, boosted by extraordinary payments
  • Underlying growth was slower, at just 2%, to £14.7bn.
  • Growth is expected to slow for the rest of the year due to the sluggish economy.

Extraordinary windfall payments lifted dividends paid by UK-listed companies to £15.6bn in the first quarter, but growth is expected to slow this year amid a brighter profit outlook. weak.

Topline figures show dividends rose 4.9 per cent to £15.6 billion in the first quarter of 2024, with 95 per cent of payers increasing or keeping dividends stable, according to Dividend Monitor. Computershare.

Underlying growth was slower, with regular dividends rising just 2 per cent to £14.7bn, as most sectors recorded steady, low single-digit growth.

Flying high: Airline, travel and leisure companies saw the fastest growth in the first quarter

The UK, which dominated dividend payments last year thanks to higher interest rates, was largely absent in the first quarter, but Computershare expects the sector to make the biggest contribution throughout the year.

Payments from leisure and travel businesses grew the fastest (from £22m to £76m in the last year), although figures remain well below pre-2020 levels.

Food, drink and tobacco was the only major sector to show growth in total payments value in the first quarter, helped by strong profits at Associated British Foods.

Historically dominant sectors such as healthcare, oil and telecommunications fell largely due to a stronger pound and a preference for share buybacks.

While the oil sector increased dollar dividends per share, the total sterling value of payouts in the sector actually fell 2.8 per cent.

“For the full year, oil dividends are likely to be broadly flat or slightly ahead,” Computershare said.

‘A more modest 2024 for the sector removes a major driver of dividend growth from the UK market this year, having made a significant contribution during its recovery from cuts made at the start of the pandemic.

‘This is not to say that oil companies do not have significant amounts of excess capital. Oil companies, and especially Shell, have significantly shifted emphasis toward share buybacks over the past two years.’

Overall, dividend payments for the rest of the year are likely to be slower than expected thanks to the sluggish economy, although overall growth is expected to rise 4.3 percent to £94.5 billion. .

However, underlying growth is expected to rise 1.5 per cent to £89.5bn, up from 2 per cent three months ago.

The 12-month forecast yield is currently unchanged at 4 percent.

Mark Cleland, executive director of issuer services at Computershare, said: ‘Dividends were healthy in the first quarter of 2024, but the overall picture of flat or slow growing dividends in most sectors is setting the tone for the entire anus.

‘Only banks and the recovering leisure and travel sector appear to achieve double-digit growth this year, while only the mining sector, which is defined by the ups and downs of the commodity cycle, appears headed for double-digit declines. .

“This modest dividend growth reflects the earnings picture: cost pressures have eased for many companies, but the cost of capital has risen sharply and economic growth is sluggish at best in the UK and in much of the world.

Henderson High Income fund manager David Smith said: “While underlying dividend growth is likely to be relatively low this year, representing lackluster aggregate earnings growth, we expect things to improve during the second mid-year as cost pressures ease and interest rates decline. (especially in the UK) and economies are beginning to recover driven by real wage growth and a more buoyant consumer.’

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