- Companies paid out £90.5bn in 2023 pushed by the banking sector
- Payouts elevated by nearly a 3rd to £13.8bn in line with Computershare
- Energy and utilities continued to drive dividend development however mining flagged
Dividend payouts by UK-listed corporations rose to £90million final yr, with banks main the cost because of increased rates of interest.
Headline figures present dividends dipped 3.7 per cent to £90.5billion in 2023, however this was largely due to decrease one-off particular dividends.
Underlying development was considerably higher – common dividends rose 5.4 per cent to £88.5million, in line with Computershare’s Dividend Monitor, with a lot of the expansion coming within the closing quarter.
HSBC was the most important driver of development in dividend funds final yr
Dividends grew 15.6 per cent within the fourth quarter largely pushed by HSBC, which restored quarterly payouts for the primary time for the reason that pandemic, and the broader banking sector.
It marks the primary time banks have been the largest-paying sector since 2007, elevating their payouts by nearly a 3rd to £13.8billion in 2023.
Computershare’s Mark Cleland stated: ‘The return to prominence by the banks is really remarkable.
‘Thirteen years of rock-bottom interest rates made it very hard for the sector to make profits, but the need to quell inflation with higher interest rates means the last two years have delivered a dramatic turnaround.
‘Bank investors are reaping the dividends of this reversal and we expect them to see even larger payouts in 2024.’
Higher vitality costs drove a 15.8 per cent enhance in dividends from oil corporations, whereas payouts by utilities corporations hit a report excessive because of inflation-linked insurance policies.
Mining majors made the most important detrimental affect with a fall of £4.5billion, or 28.4 per cent, throughout the yr due to weakened commodity costs. But the sector nonetheless accounted for £1 in each £8 distributed by UK corporations final yr.
Computershare additionally highlighted the affect of plenty of massive buyback programmes on payouts.
Companies who really feel the present share worth doesn’t replicate their true worth have a tendency to interact in buybacks to spice up their earnings per share.
In the fourth quarter, housebuilder Vistry cancelled its fourth quarter dividend and used the money to repurchase shares.
Natwest, Aviva, HSBC, BP, Glencore and Centrica are different large names engaged in share buyback programmes.
In the absence of share buybacks, Computershare calculate sthat underlying dividend development would have been 7.2 per cent final yr.
Cleland stated: ‘Payouts may well remain below their pre-pandemic highs, but significantly larger share-buyback programmes have provided an alternative route for channelling surplus capital to shareholders.
‘These programmes also conceal the extent to which dividends are really growing by reducing the number of shares in issue. This is not to say that either buybacks or dividends are superior – they just represent a different way of cutting the cake.’
Computershare anticipates the most important dividend paying sectors – banking and oil – are prone to develop extra slowly in 2024, whereas mining is prone to decline additional.
It forecasts UK underlying dividend development to gradual to 2 per cent this yr, which means common dividends of £89.9billion and a headline complete of £93.billion.