Dividends from UK shares continued to grow faster than inflation in the third quarter of 2019, despite the turbulent and shifting political landscape. Compared with the same quarter in 2018, UK dividend payments rose by 6.9% to a new third quarter record of £35.5bn.
Link Asset Services (LAS), the share registrars, said a number of different factors contributed to the growth:
- A near 300% increase in special or ‘one-off’ dividend payments.
- A 29% increase in payments from companies in the mining sector, which is now second only to the banking sector in terms of the value of dividends paid.
- Foreign exchange gains on dividends declared in US dollars and euros added 2.6% to the overall dividend growth figure, the flip side of adverse impact of political uncertainty on the pound.
Dividend payments due to reach £100bn
As the graph shows, total dividend payments in 2019 are estimated to exceed £100bn for the first time – that’s 10.4% above last year. The importance of special dividends to achieving that growth is highlighted in the different heights of the red columns in 2018 and 2019.
Two of those driving factors for 2019 dividend growth – exchange rate movements and one-off payments – could reverse direction in the coming year. LAS suggest removing these from the calculations would show the trend for dividend growth as ‘flat or low single-digit increases’.
On the other hand, the upward trajectory is not expected to last. LAS expect shares to yield 4.4% over the next 12 months, excluding any special dividends. But as it notes, ‘By comparison, the yield on UK government bonds dropped to just 0.49% in Q3, while residential property and savings rates were flat.’
Getting financial advice and regular reviews can help you to ensure your money is invested in line with your attitude to investment risk.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.