UK companies increased their dividends payments to investors in 2022 at a slower pace than in 2019, according to latest research.
During the pandemic, there had been significant damage to dividend payments from UK-listed companies. In early 2020, the Bank of England blocked payments from major banks, who had traditionally been a big provider of dividends. Shell and BP responded to falling oil prices by cutting their dividends by 66% and 50%.
More companies followed this trend in an aim to preserve their capital by either suspending or cutting their dividends. The total dividend pay out from UK companies was at 42.7% by the end of 2020, which was down on 2019. This means that £45 billion of investors’ income had disappeared in the space of 12 months.
Growth in 2021 and 2022
In 2021 the dividend picture flipped almost as drastically. The total pay out had risen by 42.9%, but all of the lost income was not recovered. In order to recover from a 42.7% fall, there would need to be a rise of 74.5%. The total pay out was still £19.4 billion below 2019.
Data in 2022 shows that total pay outs had grown again, but at a much slower pace of 8.0%. That shrank the gap with 2019 to £12.4 billion. Most importantly for many investors, regular dividends (as opposed to the volatile one-off kind) rose by 16.5%.
At present, an investment in the UK stock market can offer an average dividend yield of 3.45%. Funds in the UK Equity Income sector focus on the higher dividend paying shares which have a yield of over 4.5%. The gap between equity yields and deposit rates have decreased significantly since the start of 2022. This is due to the rise in interest rates from the Bank of England and may have put off some individuals from investing for the time being.
If you are making any changes to your long-term strategy do make sure you take professional advice before doing so. If you’d like to discuss your portfolio with one of our professional advisers, please do get in touch.