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UK dividends decline slows in Q1

uk_dividendsUK dividends fell at the slowest rate in a year during the first quarter, with the oil sector making up around half of the total cuts.

Payouts fell in Q1 by 26.7% to £12.7 billion on an underlying basis year-on-year. According to the latest data from Link’s Dividend Monitor, the decline was the slowest in a year, while half of companies increased, restarted, or held dividends steady.

Dividend cuts in Q1 totalled £5.8 billion, with around half coming from the oil sector. Other big reductions came from telecoms giant BT, Easyjet, and Associated British Foods (the owner of retailer Primark).

The latest data marks a turning for the tide for UK dividends and stocks, which have been heavily impacted by the Covid-19 pandemic.

Over the last 12 months, the pandemic caused a 41.6% fall in dividends, with cuts totalling £44.8 billion as two thirds of companies made payout reductions according to Link.

Covid-19 has cost investors £44.8 billion in lost dividends from Q2 2020 to Q1 2021. 

The banks, banned from paying dividends by the Prudential Regulation Authority, made up three tenths of the decline, oil companies another quarter, said Link Group. 

Ian Stokes, managing director of corporate markets Emea, at Link Group said: “After the year-long pandemic winter for dividends, the buds of spring are about to burst into bloom. It’s hard to characterise the big drop in the first quarter as anything but bad news - but look closer and the green shoots are already sprouting.”

Stokes also highlighted that “big changes” are coming in the second quarter. He explained that, during the pandemic, many companies that had been over-distributing permanently reset their dividends to more sustainable levels.

“Most of these now hope to grow their dividends from this lower base. For others the effect of the cuts is more transitory so they will bounce back quickly,” he said.

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