UK corporate dividends slumped in the third quarter of 2024 as the traditionally generous mining sector slashed payouts.
Headline dividends fell by 8.1 per cent year-on-year to £25.3billion in the three months ending September, according to the latest Dividend Monitor published by financial services provider Computershare.
It marked the weakest third quarter for dividends since 2020, when Covid-related curbs led to companies cutting back shareholder payouts to preserve cash.
Declining payouts: UK-listed businesses paid fewer dividends in the third quarter of 2024, following smaller payouts by the mining sector
Mining firms paid out £2.6billion less during the period, partly because shrinking commodity prices hit profits at groups like Antofagasta and Anglo American.
However, Computershare said the decline was primarily because Glencore was cutting back to fund its £5.6billion takeover of the steelmaking coal business of Teck Resources.
It further attributed the overall drop in dividends to ‘meagre’ one-off special dividends, large share buyback schemes, and the pound’s ‘rapid strengthening’.
Sterling’s value has appreciated significantly against the US Dollar and Euro over the past year as the Bank of England has held interest rates at elevated levels for longer periods.
Mark Cleland, Computershare’s chief executive of issuer services for the UK, South Africa and Ireland, noted that around two-fifths of UK dividends are declared in US dollars.
Cleland added that his firm’s dividend figures were ‘much more encouraging than the figures suggest if you look beyond the typically volatile mining sector and take factors like exchange rates and one-off special dividends into account’.
Of the 21 sectors measured in the study, 17 of them enlarged payouts, while about 75 per cent of businesses either hiked dividends or kept them stable.
The top five UK dividend payers over the last few years have been dominated by miners
At the same time, four industries reported paying 9 per cent more in total dividends: industrials, consumer discretionary, information technology, and healthcare and pharmaceuticals.
Rio Tinto was the largest dividend payer during the third quarter, followed by oil supermajor Shell, National Grid, HSBC Holdings and British American Tobacco.
Collectively, these five companies handed out £7.5billion to shareholders, equivalent to 29 per cent of all dividends paid.
Computershare expects UK-listed firms will pay £92.3billion in headline dividends in 2024, a 2 per cent rise on the previous year.
It had previously forecast a 3.8 per cent increase but has curtailed this due partly to the impact of exchange rates and stock repurchases.
Cleland added: ‘Share buybacks mean companies can return surplus cash to shareholders, but fewer shares in issue mean the total cost of providing dividends is lower.
‘This is not necessarily bad news, because buybacks mean additional cash reaching shareholders, albeit in a different way.’
Total 2024 dividends are still expected to outpace last year’s result
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