UK dividends up 4.6% to £15.2bn in first quarter

UK dividends rose 4.6% on a headline basis to £15.2 billion and ahead of forecasts during the first quarter of 2023, according to the Dividend Monitor report by financial services company Computershare.

The underlying rate of increase, which adjusts for one-off special dividends and exchange rates, was 5.6% in Q1.

The quarterly report revealed that oil companies made the largest contribution to Q1 2023 dividend growth.

It said that housebuilding, the consumer goods and services sector and banks also delivered significant contribution growth during the period.

Most companies in the “defensive” sectors, which include basic consumer goods, tobacco, telecoms and utilities, delivered flat payouts or single digit increases during Q1 2023.

The report added that full-year headline dividend payouts are anticipated to fall as a result of likely lower one-off special dividends – which in Q1 2023 fell by three quarters year-on-year to £223 million, well below the £500 million forecast – and the impact of likely negative exchange rates during the second half of the year.

“The data show headline dividends falling 2.8% to £91.3bn for 2023,” said Computershare.

“Nevertheless, after adjusting for one-off special dividends and exchange rates, the underlying growth rate is on track for 2.0% this year.”

Mark Cleland, CEO Issuer Services United Kingdom, Channel Islands, Ireland and Africa at Computershare, said: “Data show that the UK economy has proved itself more resilient than some feared thanks to markets judging that interest rates may peak at a lower level than originally deemed necessary in order to control inflation.

“However, despite the growth contributed this year by banks, oil companies, utilities and food retailers, slowing GDP and higher financing costs mean that earnings for many UK companies are under pressure.

“Some companies have started to make dividend cuts, with the biggest impact expected to come from the mining sector – which favours special dividends and which has made very high payments during the past two years – as it adjusts to lower, post-pandemic commodity prices.”

The report said it expects banks, which were minor contributors during Q1 2023 for seasonal reasons, to provide the main engine of UK dividend growth for the second year running, supplemented by oil companies.

All banks that paid dividends during Q1 2023 made a significant increase year-on-year, it noted.

In the utilities sector, most companies delivered characteristically low single-digit increases in their dividends, however SSE, which controls a large share of the UK’s gas storage and delivers power to homes and businesses, delivered a 14% increase.