UK dividends jump five per cent in first quarter as airlines bounce back
UK dividends grew by 4.9 per cent in the first three months of 2024, reaching £15.6bn thanks to one-off special dividends.
Some 95 per cent of companies either increased their dividends or held them steady, according to Computershare’s latest Dividend Monitor, though regular dividends rose only two per cent throughout the quarter, as most of the growth came from special dividend issuance.
The best issuers were centred around the airline, leisure and travel sector, as payouts finally start to climb back towards pre-pandemic levels.
Caterer Compass also saw strong issuance thanks to a recovery in global travel, pushing up the consumer goods sector average.
Meanwhile, the food, drink and tobacco sector also saw growth, thanks mainly to strong profits at Primark owner Associated British Foods
The other largest sectors of healthcare, banks, oil and telecoms all declined modestly owing to a stronger pound and the impact of share buybacks.
Computershare attributed this slight decline to the growing popularity of share buybacks, noting that around thirty large British companies were currently running such schemes, and spending about three times more on the schemes than a decade ago.
Forecasts for dividend growth in the entirety of 2024 ticked up as a result of the strong quarter, from 3.7 per cent to 4.3 per cent.
This would mean a total payout of £94.5bn throughout the year.
Computershare’s Mark Cleland said: “Dividends were healthy in the first quarter of 2024, but the general picture of flat or slowly growing dividends in most sectors is setting the tone for the whole year.
“Only the banks and the recovering leisure and travel sector look likely to deliver double-digit growth this year, while only the mining sector, which is defined by the ups and downs of the commodity cycle, seems set for double-digit declines.
“This modest growth in dividends reflects the earnings picture: cost pressures have eased for many businesses, but the cost of capital has risen sharply, and economic growth is sluggish at best in the UK and in much of the world.
“This makes it difficult for companies to build earnings momentum, which influences how much boards decide to return to shareholders in the form of buybacks or dividends.
“This largely explains why the outlook for 2024 is relatively modest.”