MUFG Pension & Market Services
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UK Dividend Monitor Q1 2019

16 April 2019 / Link Group

Michael Kempe, Chief Operating Officer of Link Market Services said:

“The first quarter is usually just the warm-up act for dividends, but this year it has put in a stellar performance. Miners are taking centre stage with large special dividends, but these reflect restructuring and asset sales rather than trading profits; underlying growth from this sector is now much more normal after grabbing the headlines over the past couple of years.


  • UK dividends rose 15.7% on a headline basis to a Q1 record of £19.7bn
  • A huge special from BHP boosted the total
  • Underlying growth (excluding special dividends) of 5.5% was weaker than expected from larger and smaller companies alike
  • Alongside miners, tobacco stocks raised payouts; telecoms and retail disappointed
  • UK shares yield 4.6%, close to historic highs
  • Headline dividend forecast raised to record £106.1bn, up 6.3%; this will be the first time dividends have breached the £100bn barrier
  • But underlying growth expectations downgraded slightly to £99.7bn, up 3.9% year-on-year

UK dividends jumped 15.7% in Q1 2019 to £19.7bn, easily a first quarter record, according to the latest UK Dividend Monitor from Link Asset Services. The dramatic increase was mainly influenced by very large one-off special dividends. Underlying dividends (excluding specials) by contrast grew slightly more slowly than Link expected, rising 5.5% to £17.6bn. Moreover, two-thirds of the underlying growth rate was contributed by exchange-rate effects.

The biggest impact came from BHP. The global mining group paid a huge £1.7bn special dividend from the proceeds of the disposal of its US shale oil interests, on top of a healthy increase in its final dividend. BHP was consequently the second largest dividend payer in Q1. Rio Tinto is following suit in the second quarter, distributing cash from the sale of its Australian coal assets.

The two largest-paying sectors, oil and pharmaceuticals accounted for almost two fifths of the Q1 total. Growth in these two sectors was almost entirely due to positive exchange-rate effects. 

With the exception of a small increase from BP, the biggest companies all held their dividends flat on a constant-currency basis. Tobacco stocks, by contrast, raised their payouts substantially. Weaker sectors include telecoms, where BT cut its payout and Vodafone’s was flat in euro terms. Retail was also disappointing, with most companies holding dividends flat, but there were notable cuts from Dixons and Debenhams.

Top 100 dividends outperformed the mid-caps, even after special dividends and exchange rates were taken into account, reflecting a slowdown in earnings growth for companies outside the multinational superleague. After stripping out exchange rates and special dividends, top 100 payouts rose 2.6%, while mid-cap payouts fell 2.5%.

Yield is the expected value of dividends divided by share prices. It enables comparison between different asset classes. Despite share prices rebounding by around a tenth since January, the yield on UK shares has only dropped slightly from 10-year high in January, and now stands at 4.6% excluding special dividends. This is exceptionally attractive by historic standards, and far exceeds the yield availably on other asset classes like government bonds, property and cash.

Based on the slightly weaker-than-expected start to 2019, and slower growth in company earnings, Link now expects underlying growth of 3.9% this year, down from 5.3% in January. That will take underlying dividends (excluding specials) to £99.7bn, a comfortable record. The big boost from specials takes headline dividends to a record £106.1bn, smashing through the £100bn mark for the first time, an increase of 6.3% year-on-year.

Michael Kempe, Chief Operating Officer of Link Market Services said:

“Uncertainty abounds in markets, about the world economy, and about the outlook for the UK in the light of the turmoil surrounding Brexit. For dividends, however, we are confident that 2019 will show good growth, even if Q1 was, in truth, a touch weaker than we expected on an underlying basis.

“Moreover, the yield on UK shares is a third higher than its long-run average and suggests equities are still extremely cheap, both in comparison to other countries and to other asset classes. Payouts would need to fall far more than they did even during the financial crisis to bring the UK equity yield back into line with the long-run average, and we just don’t see that happening.

“For UK dividends this year a big unknown is the outlook for sterling, which is obviously entangled in the torturous twists and turns of the Brexit process. But over the long-term, exchange rates are just noise as losses one year are later compensated with gains. Investors focused on the fundamentals can see that UK equities provide solid income with steady growth."

With grateful thanks to Exchange Data International for providing the raw data

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