UK dividend payouts rise as banks and miners drive third-quarter gains

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UK dividend payouts rise Q3

Highlights

UK dividend payments rose 14.1 per cent to £28.4bn in Q3 2023, the highest third-quarter total since 2019, driven by banks and miners.
Miners' payouts jumped 89.6 per cent, with Rio Tinto raising dividends 44 per cent to £2bn, and Glencore and Anglo American more than tripling their distributions.
Despite higher cash returns, the dividend yield fell to 3.1 per cent, lagging the 10-year gilt yield of 5.4 per cent by the widest gap since 2007.

Third-quarter payouts reach seven-year high

As reported by Financial Times, dividend payments in the UK increase 14.1 per cent on a headline basis to £28.4bn in the third quarter, according to Computershare’s UK Dividend Monitor. That marks the highest third-quarter total since 2019 and points to stronger momentum in shareholder payouts after more subdued growth in recent years.

Mining companies lead the increase, with payouts jumping 89.6 per cent from a year earlier, helped by higher commodity prices, especially for copper and precious metals. Rio Tinto raises its dividend 44 per cent to £2bn, the largest payout of the quarter, while Glencore and Anglo American more than triple their distributions and Antofagasta and Fresnillo also post strong gains.

Bank dividends rise 24.5 per cent year on year, with Barclays nearly doubling its interim payout, Standard Chartered increasing its distribution by 66 per cent and Lloyds and NatWest lifting theirs by 25 to 30 per cent. Across all sectors, the median dividend increase is 5 per cent, which Mark Baker, author of the Dividend Monitor, says is above recent norms and signals improving momentum in payouts.

Yields lag gilts as weaker sectors cut distributions

Despite the stronger cash returns, rising share prices push the dividend yield down to 3.1 per cent from 3.2 per cent a year ago. That leaves the market yield trailing the 10-year gilt yield of 5.4 per cent by the widest margin since 2007, reflecting what Baker describes as a more normal relationship between equity income and fixed income returns.

Computershare says banks and miners account for 85 per cent of dividend growth in the quarter. Baker says miners benefit from global data centre expansion that supports demand for metals, while banks are helped by higher-for-longer interest rates and elevated savings levels that provide cheaper funding.

Not all sectors are improving. WPP cuts its dividend by 69 per cent amid weak trading and restructuring, Mondi reduces its payout by 60 per cent because of rising costs and falling earnings, and retailers remain under pressure as Pets at Home cuts its final dividend by 67.5 per cent, B&M European Value Retail lowers its distribution by 37 per cent and WHSmith eliminates its payout entirely.

Computershare forecasts that total UK dividend payments will rise 7.3 per cent to £92.8bn in 2026. Even so, that would remain below the 2019 peak of £100.5bn and represents a 31 per cent decline in real, inflation-adjusted terms.

Our earlier coverage of Chancellor John Healey’s pre-Budget fiscal stance explained that the government is sticking with deficit-reduction plans ahead of the October 28 Budget, even as UK GDP surprised slightly to the upside with 0.1% growth in August. We also highlighted the political debate around how to balance fiscal discipline with growth support, including warnings that measures such as higher bank taxes could add pressure to a key dividend-paying sector.

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