UK companies distributed dividends of £24.6bn in Q3, down 1.4% on a headline basis year-on-year, according to the latest Dividend Monitor from Computershare.
This was driven by several factors, including one-off dividends dropping to their lowest levels since Q3 2020, a handful of top 100 companies reducing payments and a growth in the number of companies diverting cash to share buybacks.
Some companies made big cuts – knocking 5.7 percentage points off the Q3 growth rate between them – were responsible for the overall decline.
However, the underlying decline of 0.6% was slightly better than the predicted – 0.9%.
Seventeen of 21 sectors saw higher payouts with the banking sector, driven by NatWest and Lloyds, boosting payouts by 1.5 percentage points. NatWest raised its dividend by more than half on the back of strong earnings growth, and Lloyds also made a large increase.
Mid-caps exceeded the growth seen in the top 100.
The mining sector saw payouts fall by a quarter as profits among the biggest companies came under further pressure.
Dividend cuts by Vodafone and Burberry also made a significant impact.
For the second consecutive quarter Rolls-Royce made the largest positive contribution with its first interim payment since before the pandemic, adding 1.5 percentage points to Q3 growth.
Across the wider market, median per-share dividend growth was a relatively modest 3.0%, but there were pockets of real strength.
The report points out that the outlook for the fourth quarter has worsened with a greater drag from share buybacks, slower median dividend growth and some new cuts in the pipeline.
For example, Shell has spent almost twice as much on buybacks over the last year than on dividends – before 2022 the company’s dividends had always been larger.
At the headline level, one-off special dividends are proving unusually rare this year.
As a result, the report has lowered Q4 projections for them, taking the annual total to £2.5bn, down £2.7bn from £5.2bn in 2024.
Along with the effect of the strong pound, the report anticipates total UK dividends falling to £87.2bn in 2025, down 2.3% on a headline basis, compared to a projected 1.4% decline three months ago.
The combination of surging UK share prices and a slightly lower report forecast means the prospective yield on UK equities for the next 12 months has dipped to 3.3%, down from 3.4% three months ago.
“We are seeing some further cuts for Q4, and little prospect of higher payouts from global multinationals like those in the oil sector,” said Mark Cleland, CEO issuer services United Kingdom, Channel Islands, Ireland and Africa at Computershare.
“The combined effect of widely reported falls in business and consumer confidence, sticky inflation and high market interest rates also make for a challenging economic backdrop for domestically-focused companies,” Cleland said.
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