UK Dividends Fall In Q3 As 2023 Outlook Downgraded

Steep cuts to mining dividends and lower one-off special dividends were the primary reason for the reduction, the study found.

Mining dividends fell 23.6% year-on-year due to lower commodity prices impacting profits, taking five percentage points off Q3's growth rate.

One-off special dividends declined by three quarters to £835m - less than half of the Q3 average for the last ten years,  reducing the headline growth rate by over seven percentage points.

Global dividends hit Q1 record of $326.7bn

Regular dividends, which exclude one-off special dividends, totalled £26.6bn for the period, a 2.4% increase on an underlying basis.

Excluding the mining sector, underlying growth for the period was 7.4%.

Computershare described the drop as "more than expected" and updated its forecast for 2023.

At the end of Q2, the predictions expected headline payouts to fall 1.7% to £92.4bn by the end of the year, but they are now expected to fall 3.4% to £90.6bn.

Mark Cleland, CEO of issuer services in the UK, Channel Islands, Ireland and Africa at Computershare, said: "Current reductions from mining companies are masking much better growth from the wider market, with the fourth quarter already delivering very encouraging growth.

"Most mining companies typically pay dividends that vary with the commodity cycle, meaning payouts can rise and fall dramatically."

He continued: "However, there is significant uncertainty about the outlook beyond 2023, and the extent to which UK and global economies respond to the rising cost of finance and tighter credit conditions will be an important driver of company earnings and therefore dividend growth."

Dividends continue to outpace profit growth in 2022 and 2023

Utilities made the strongest contribution to growth, paying out a "record-breaking" £2.7bn due to inflation-linked policies.

Banks continued to thrive due to wider interest margins and have been returning far more capital to shareholders.

Oil companies also had increased dividends, reflecting the benefits of rising energy prices.

Cleland added: "The banking and oil sectors remain healthy at present, but we anticipate a more challenging dividend environment ahead."

Underlying growth from the top FTSE 100 companies surpassed the mid-250, with 2.7% and 0.6% respectively.

Large-cap companies were the key dividend drivers currently, while mid-caps have been making cuts in Q3.

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