UK companies paid their shareholders £92.1bn in 2024, a 2.3 per cent year-on-year rise on a headline basis, although the total payout on a constant-currency basis fell by 0.4 per cent, Computershare has revealed.

The financial services firm’s latest Dividend Monitor report noted that the headline growth rate was supported by higher special dividends, but the “more important underlying total”, which excludes these one-offs, fell on a constant-currency basis to £86.5bn.

Last year’s dividend payments were impacted by a £4.5bn reduction in payouts from mining companies, which was the largest dividend-paying sector between 2021 and 2023.

Computershare said the ‘big cuts’ in the mining sector masked a better picture elsewhere.

The headline growth rate in 2024, excluding the mining sector, was 8.4 per cent during the year, with the underlying growth rate a “more encouraging” 4 per cent.

The underlying rate was more in line with the 4.5 per cent median per-share dividend growth across the UK market, which represents the typical rate of increase at each company.

Overall, 77 per cent of companies either raised or held dividends steady year-on-year in 2024.

Apart from the mining sector, housebuilding was the only other sector to see a significant reduction, as it was affected by cuts from Persimmon and Bellway.

The report noted that banks, insurance companies, and food retailers were among the sectors to make the strongest positive contributions.

In the fourth quarter of 2024, headline dividends fell by 0.5 per cent, better than the expected 1.7 per cent decline expected by the Dividend Monitor’s forecast.

For 2025, the report forecast that the median dividend growth per share of 4 per cent to 4.5 per cent would continue, but the market total will “probably not reflect this” due to the announcement of some large cuts.

Exchange rates are on track to boost headline dividend growth in 2025, but if one-off special dividends returned to more average levels in 2025, they would reduce the headline rate.

Overall, Computershare forecast payouts in 2025 to reach £92.7bn at the headline level, while the underlying total is expected to rise to £88.2bn.

“It is worth highlighting that dividend growth was better outside the highly cyclical mining sector,” commented Computershare CEO issuer services United Kingdom, Channel Islands, Ireland and Africa, Mark Cleland.

“In addition, share buybacks are having an impact, diverting an estimated £42bn-£45bn of cash in 2024 to shareholders that might previously have been paid mostly in dividends.

“Even so, the report’s predicted 4-4.5 per cent typical company dividend growth for 2025 is modest in the context of UK inflation at 2.5 per cent and will be impacted again by some notable cuts in the year ahead.

“The report indicates that sharply rising borrowing costs will affect government finances, economic growth, business investment, profit margins and consumer spending. These higher market interest rates will likely have an impact on the ability of companies to generate cash for shareholders.”

Henderson High Income Trust portfolio manager, David Smith, added: “While at the headline level dividend growth from the UK market in 2024 looks lacklustre, this has been distorted by the large cuts to dividends in the volatile mining sector.

"Dividend growth excluding this sector was 4.0 per cent which is reasonable given the uncertain economic outlook. The impact of the UK Budget is likely to curtail dividend growth for some domestic businesses given corporate margins are coming under pressure from the increase in National Insurance and minimum wage.

"However, one must remember that 75 per cent of the UK market’s revenues are derived overseas where the global economy is improving. Additionally the outlook for dividends in the banking sector is robust, especially in an environment of higher for longer interest rates, while the negative impact from dividend cuts in the mining sector is coming to an end.

"The trend for companies to buy back their shares with excess cash at the expense of special dividends continues, however, underlying dividend growth next year should be supported by international earners and banks, while dividend cover for the UK market in aggregate is healthy.”

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