The Big Picture THE BIG PICTURE: BANKING ON GOOD DIVIDENDS
UK annual dividends: A positive outlook
100 110 120
30 40 50 60 70 80 90
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023e Regular Dividends
Special Dividends Source: UK Dividend Monitor
Dividends are set to beat expectations in 2023 by some dis- tance, finds Andrew Holt.
There is good and bad news for investors on the dividend out- look. The bad news is that UK cash returns fell 9% on a head- line basis to £32.8bn in the second quarter. The good news – albeit relative – is that regular dividends tell us more about the true trend: and they beat forecasts in the sec- ond quarter at £32.2bn.
The underlying growth rate, which adjusts regular dividends for exchange rate movements, was 3.5% in the second quarter, down from 5.2% in the previous three months. By far the biggest contribution came from banks, which have reported strong profits. They paid £7.8bn, an impressive three- fifths rise year-on-year. Banks are also comfortably 2023’s big- gest engine of UK payout growth, according to the UK Divi- dend Monitor. Meanwhile, the broadly based industrial goods and support services sector delivered a double-digit dividend growth sur- prise in the second quarter: with 95% of companies in the sec- tor recommending annual increases.
The biggest negative impact came from sharply lower mining payouts. These fell by a third, as lower commodity prices saw
an impact on cashflows in the sector. And while economists ponder the potential deterioration of the British economy, with assessments edging towards a recession, the paradox is that the dividend picture has brightened. The banking sector in particular is benefiting from the inter- est-rate medicine the Bank of England is administering to cool the inflationary fever. Outside of the banking sector, companies with pricing power are building margins, contributing to inflation, of course, but in turn, boosting their dividend fire power. For the rest of 2023, the third quarter is already playing out in line with Dividend Monitor expectations earlier in the year, but the fourth quarter now in fact looks likely to be markedly stronger. Headline payouts are still likely to fall this year, down 1.7% to £92.4bn, as lower one-off special dividends and negative exchange-rate effects in the third and fourth quarters take their toll. But this is nevertheless £1bn more than was forecast three months ago. Regular payouts that exclude specials are now on track to reach £88.9bn, almost £2.7bn more than forecast three months ago, and equivalent to an encouraging underlying increase of 6.1% for the year.
Issue 126 | September 2023 | portfolio institutional | 9
billions
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52
