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Highlights
- UK dividends dropped by 9% in the second quarter of 2023 due to lower one-off special dividends.
- The banking sector made the largest contribution to dividend growth by distributing 8 billion.
- Dividend Monitor 2023 highlights that regular dividends are expected to increase by 6.1% while headline dividends would fall by 1.7%.
A report by financial services company Computershare Limited (ASX: CPU) highlighted that the UK dividends fell by 9% year-on-year to GBP32.8 billion in the second quarter (2Q) of 2023. However, the regular dividends rose 3.5% to GBP32.2 billion in the reported period.
The latest quarterly Dividend Monitor shared by the ASX-listed company revealed that banks made the highest contribution as the banking dividends surged 61% year-on-year to GBP7.8 billion.
The report highlighted that the UK banking sector has been reporting significant profits amid increased interest rates as the Bank of England tries to control inflation.
Data Source: Company update
Meanwhile, the industrial goods and support sector registered a 12% jump in payouts, as 95% of the companies in this sector reported annual increases. The dividend growth in airlines, leisure and travel sector has been slowest as the industry is still in the restoration phase post the Covid-19 pandemic. The biggest negative impact on dividend growth came from the mining sector as mining dividends dropped by a third because of a fall in commodity prices affecting cash flow in this sector.
The special dividends witnessed a sharp decline in 2Q.
UK dividends likely to rise more quickly than expected
The banking sector is on track to increase headline payout by over GBP3 billion in the full year 2023. The industrial sector is likely to be affected by higher interest rates; however, the profit margins are currently high, thus providing cash for shareholders, suggests the report.
The airlines, leisure and travel sector are yet to restore dividends to the pre-pandemic level. The weakest sector during 2Q was the mining sector, still, Computershare expects this sector to deliver more dividends this year compared to 2020.
Between January to June, few special dividends were announced; therefore, the total is expected to be almost two thirds lower for 2023.
The headline dividend is forecast to drop by 1.7% to GBP92.3 billion, and the regular payout forecast has been increased by 6.1% year-on-year to GBP88.9 billion.
