One-off payments lift UK dividends to record £37bn in Q2, but mining sector weighs on growth

One-off special payments boosted dividends paid by UK-listed companies to a new record, but the mining sector dragged down regular payouts.

Headline figures show dividends rose 11.2 per cent to £36.7bn in the second quarter, according to Computershare’s Dividend Monitor.

Underlying growth was significantly slower, with regular dividends up just 1 percent thanks to a big cut in mining payouts, but still hitting a record £32.5 billion during the quarter.

Banks, which have dominated payments, remained the strongest sector and are on track to make record payments thanks to sustained high interest rates.

It distributed a further £1.1bn in regular dividends, with the largest special payment coming from HSBC, which distributed proceeds from the sale of its Canadian business.

The healthcare sector grew by a quarter, thanks to the strong performance of Haleon and GSK.

Meanwhile, 16 of the 21 sectors recorded higher payouts, with the average company-level dividend increasing by 5.4 percent.

Computershare’s Mark Cleland said: ‘Higher profits mean most sectors are paying out more dividends and spending a lot of money on share buybacks, although this might not be obvious given the gravitational pull of mining companies on UK dividends is hard to escape.

“Our figures for the second quarter show that most sectors are generating growth and we expect this to continue in the second half of the year.”

The housebuilding sector had a weak quarter, with payouts down 37 per cent year-on-year, reflecting some companies such as Vistry opting to scrap dividend payments in favour of share buybacks.

However, it was the mining sector, which is in its second consecutive year of cuts, that saw the biggest drop in payouts, which are a third lower than the previous year.

Since 2015, the sector has accounted for £1 in every £11 of UK dividends, but Computershare says it has caused “roughly a third of the variability in all UK dividends”.

The biggest negative impact came from Glencore, whose payout was £1.5bn lower than a year earlier, and its third-quarter cut is likely to be larger.

Only Rio Tinto and some smaller players increased their dividends year-on-year in the second quarter.

Computershare said the “mining effect” means it has cut its underlying growth forecast for this year to 0.1 percent, down from 1.5 percent three months ago. Excluding mining companies, the forecast would show double-digit underlying growth this year.

Cleland said: ‘The mining sector has helped drive faster UK dividend growth over the long term, but the highly cyclical nature of the industry means it has introduced much more volatility into the overall UK dividend picture each year.

‘In 2024, it will act as a major brake on progress: for the full year, mining dividends are likely to be more than £4bn lower than in 2023, offsetting all the underlying growth brought by the broader market.’

While headline growth is expected to slow to £93.9 billion, it still represents a year-on-year increase of 3.8 per cent.