UK Dividends Fall 8.3% In Q3, Link Group Raises Full-Year Dividend Forecasts

UK dividends dropped 8.4% in the third quarter following the delisting of BHP Group, Link Group has reported.

BHP’s exit from the FTSE 100 in January saw total dividends drop to £31.4 billion between July and September.

Excluding this one-off event dividends from UK shares rose 1% year on year. And on an underlying basis — in other words stripping out the impact of special dividends – payouts from London Stock Exchange companies rose 4%, to £28.1 billion.

Sector Differences

“Sharply lower special dividends and falling mining payouts (even after adjusting for BHP) were offset by strength among banks and other financials as well as oil companies,” Link Group said.

Payments from banks and other financial shares leapt 49.3% year on year, whilst dividends from oil and gas producers rose 18.9% from the same 2021 period. Industrials and consumer services “also did well” on the dividend front during the third quarter, it commented.

However, weak dividends from basic consumer goods companies, allied with a larger-than-expected drop in volatile mining dividends, meant that third-quarter payouts missed Link Group’s estimates.

It said that dividends from mining stocks dropped 21.3% between July and August. Though it added that the sector “will still be the biggest payer in 2022 and perhaps even in 2023.”

Sterling’s Fall Boosts Dividends

Sterling weakness in the third quarter boosted UK dividends by £1.9 billion meanwhile. This is because many payouts are declared in dollars.

Link Group has raised its UK dividend forecasts due to sterling’s significant fall against the US dollar.

It said that “the extraordinary surge in the US dollar will add a record £5.7 billion to UK dividends” this year. It added that the impact of currency changes will be even more pronounced during the current quarter than it was in quarter three.

2022 Dividends To Rise 5.5%

Due to recent share price falls the yield on British stocks now sits at 4.2%, according to Link Group’s calculations.

It now thinks UK dividends will reach £97.4 billion in 2022. That’s up 5.5% year on year, or 11% if BHP Group’s exit from the FTSE 100 is accounted for.

On an underlying basis total dividends are predicted to rise to £87.2 billion, up 15.3% (or 13.4% excluding BHP Group’s withdrawal and exchange rate effects).

Dividends To Hit Pre-Pandemic Highs In 2025

For 2023, Link Group predicts headline dividends to dip to £96 billion. But it thinks payouts on an underlying basis will rise slightly to £89 billion.

It said that “we expect a further reduction in mining dividends and likely lower one-off special dividends.” It added that “outside the mining sector there is still room for payouts to rise, even with a weakening economy.”

“This implies no change in our expectation that UK payouts will only regain their pre-pandemic highs some time in 2025,” Link Group said.