Last year, UK dividend payments increased by 46.1 percent to £94.1 billion after a large drop off in distributions the prior year. The increase was due in part to a record amount of special dividends totalling £16.9 billion, three times their normal level.
The information comes from Link Group, which publishes its Dividend Monitor quarterly. Stripping out specials, the underlying payouts rose by 21.9 percent to £77.2 billion last year, numbers not seen since 2015.
However, fourth quarter of 2021 growth slowed to 13.5 percent on an underlying basis although in headline terms hit 21.9 percent.
Given the resurgent commodities sector it’s little surprise that it was driving the dividend rebound as the payouts were three-times their long term average.
Banks, which had been effectively banned from making distributions during the pandemic also weighed in to aid income seeking investors as well as other sectors emerging from simply shoring up their balance sheets. ,
Despite the FTSE 100’s ‘old economy’ status, dominated by banks and mining companies, mid-cap stocks doubled their payouts compared the main index.
Going forward, Link predicts that this year underlying growth will by 5 percent, which the firm said would have been 8.9 percent if it were not for mining giant BHP Biliton’s delisting from the London exchange. Some, such as Ian Stokes, managing director of corporate markets UK and Europe, thinks losing a mining company might diversify the sources of income in what has been quite a niche group of high dividend yield sectors.
Mr Stokes said in a statement: “The recovery in UK dividends is not complete, but the easiest part of the catch up is now behind us. 2022 faces a number of headwinds in the form of Omicron disruption, inflation, and tax hikes and that adds uncertainty to our forecast.
“As the pandemic continues, it would be easy to take a knife to our expectations for dividends for the coming year. We are, however, cautiously optimistic that most sectors can deliver growth.
“The proposed imminent departure of BHP from London will help restore some balance to the UK index. The dominance of big mining groups has overshadowed the income generating capacity of the broader market and left UK payouts too heavily dependent on a single, highly cyclical sector.”