UK dividends fall as miners cut payouts

UK corporate dividends plunged in the third quarter of 2024 as the traditionally generous mining sector cut payouts.

Headline dividends fell 8.1 percent year-on-year to £25.3 billion in the three months ending September, according to the latest Dividend Monitor published by financial services provider Computershare.

It marked the weakest third quarter in dividends since 2020, when Covid-related restrictions led companies to cut payments to shareholders to preserve cash.

Mining companies paid £2.6bn less during the period, partly because falling commodity prices hit profits at groups such as Antofagasta and Anglo American.

However, Computershare said the decline was mainly because Glencore was cutting funds to finance its £5.6bn acquisition of Teck Resources’ steelmaking coal business.

It further attributed the overall drop in dividends to “poor” one-off special dividends, large share buyback plans and the “rapid strengthening” of the pound.

The value of sterling has appreciated significantly against the US dollar and euro over the past year as the Bank of England has kept interest rates at high levels for longer periods.

Mark Cleland, Computershare’s managing director of issuer services for the UK, South Africa and Ireland, noted that around two-fifths of UK dividends are declared in US dollars.

Cleland added that his company’s dividend figures were “far more encouraging than they suggest if you look beyond the typically volatile mining sector and take into account factors such as exchange rates and one-off special dividends.”

Of the 21 sectors measured in the study, 17 increased payouts, while about 75 percent of companies increased dividends or kept them stable.

At the same time, four industries reported paying 9 percent more in total dividends: industrials, consumer discretionary, information technology, and healthcare and pharmaceuticals.

Rio Tinto was the largest dividend payer during the third quarter, followed by oil major Shell, National Grid, HSBC Holdings and British American Tobacco.

Together, these five companies distributed £7.5bn to shareholders, equivalent to 29 per cent of all dividends paid.

Computershare expects UK-listed companies to pay £92.3 billion in core dividends in 2024, an increase of 2 per cent on the previous year.

It had previously forecast a 3.8 percent rise but reduced it due in part to the impact of exchange rates and share buybacks.

Cleland added: ‘Share buybacks mean companies can return excess cash to shareholders, but fewer shares in circulation mean the overall cost of providing dividends is lower.

“This is not necessarily bad news, because buybacks mean shareholders will receive additional cash, albeit in a different form.”