One-off special payouts lifted dividends paid by UK-listed companies to £15.6billion in the first quarter, but growth is expected to slow this year amid a weaker earnings outlook.
Headline figures show dividends rose 4.9 per cent to £15.6billion in the first quarter of 2024, with 95 per cent of payers either increasing or holding dividends steady, according to Computershare’s Dividend Monitor.
Underlying growth was slower, with regular dividends rising just 2 per cent to £14.7billion as most sectors delivered steady low single-digit growth.
Flying high: Airlines, travel and leisure companies saw the fastest growth in the first quarter
UK, which dominated dividend payments last year thanks to higher interest rates, was largely absent in the first quarter but Computershare expects the sector to make the largest contribution for the full year.
Payments by leisure and travel companies grew the fastest – from £22million to £76million in the last year – although figures remain some way below pre-2020 levels.
Food, drink and tobacco was the only large sector to show growth in the total value of payments in the first quarter, helped by strong profits at Associated British Foods.
Historically dominant sectors like healthcare, oil and telecoms all declined in large part due to a stronger pound and a preference for share buybacks.
While the oil sector increased per-share dollar dividends, the total sterling value of payments in the sector actually dipped 2.8 per cent.
‘For the full year, oil dividends are likely to be roughly flat to slightly ahead,’ said Computershare.
‘A more modest 2024 for the sector removes a significant engine of dividend growth from the UK market this year, after it made a major contribution during its recovery from the cuts made early in the pandemic.
‘This is not to say oil companies do not have significant amounts of surplus capital. Oil companies, and especially Shell, have shifted the emphasis significantly towards share buybacks in the last two years.’
Overall, dividend payments for the rest of the year are likely to be slower than anticipated thanks to the sluggish economy, although headline growth is expected to increase 4.3 per cent to £94.5billion.
However underlying growth is expected to rise 1.5 per cent to £89.5billion, down from 2 per cent three months ago.
The 12-month prospective yield currently stands unchanged at 4 per cent.
Mark Cleland, chief executive of issuers services at Computershare 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.’
Fund manager at Henderson High Income David Smith said: ‘Although underlying dividend growth is likely to be relatively low this year representing lacklustre aggregate earnings growth, we expect things to improve through the second half of the year as cost pressures ease, interest rates are cut (especially in the UK) and economies start to recover driven by real wage growth and a more buoyant consumer.’
