UK company dividends fell by 4.6 per cent in the first quarter of 2025 to £14bn, according to Computershare’s latest Dividend Monitor.

The reduction reflected lower one-off special dividends, which reduced the headline growth rate by 3.3 percentage points.

Computershare’s report also revealed that regular dividends fell by 0.2 per cent year-on-year on an underlying basis, which excludes one-off special dividends and adjusted for constant currency, to £13.6bn.

Despite the decline in Q1, the underlying figure was 2.7 percentage points better than expectations, and Computershare highlighted encouraging growth in several sectors, including healthcare, food, and industrials, as well as the leisure sector.

Furthermore, cuts from Vodafone, Burberry and Bellway Homes knocked five percentage points off the total, masking better growth elsewhere.

Median per share dividend growth was 3.3 per cent in the first quarter of 2025, with 82 per cent of companies increasing their dividends or holding them steady year-on-year.

The Dividend Monitor also stated that prospects for Q2 look “brighter”, driven by banks and food retailers.

Its forecast for underlying growth during 2025 has been revised up from 1 per cent to 1.8 per cent on a constant currency basis, based on the delivery of regular dividends of £85.6bn.

However, headline dividend growth was predicted to be zero, down from 0.7 per cent, resulting in total payouts, including one-off special dividends, of £90.1bn as the effect of a stronger pound reduced the sterling value of dividends declared in dollars.

In 2024, share buybacks totalled £63.2bn for the year, which was better than the run-rate evident from interim results reported during the year, driven by the pace of buybacks accelerating in H2 2024.

Total shareholder remuneration in 2024, which included dividends and share buybacks, was £153.4bn, up from £148.5bn in 2023.

“Dividends are typically less likely than company profits to experience short-term fluctuations either during economic turbulence or in boom times, as most companies seek to deliver steady income growth over time for their investors,” commented Computershare CEO issuer services United Kingdom, Channel Islands, Ireland and Africa, Mark Cleland.

“Nevertheless, any cooling driven by the current upheaval in financial markets and the real global economy is likely to affect profits and this will subsequently knock on to dividend payouts.

“We are unlikely to see much effect on regular dividends in the next couple of quarters, but discretionary special dividends particularly have proven more vulnerable to economic difficulty historically.”

Henderson High Income Trust portfolio manager, David Smith, added: “Although the headline dividend growth looks disappointing this was mainly due to lower one-off special dividends.

“These can be volatile, and investors shouldn’t be too concerned given they are more discretionary than ordinary dividends. Certainly, given the uncertain economic outlook caused by President Trump’s trade policies, we would expect companies to take a more conservative approach and pare back special dividends and share buybacks to preserve cash flows.

“However, it’s important to remember that UK companies are in a healthy position with strong balance sheets while ordinary dividends are well covered by profits, much more so than at the start of the Covid pandemic.

“Hence, we believe ordinary dividends will be resilient going forward on an underlying basis and we are encouraged by the 3.3 per cent dividend growth seen from the median company in the UK, which is more in line with our expectations on underlying dividend growth this year.”

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