The latest Computershare Dividend Monitor paints a gloomy picture for UK dividends. It shows a drop of 0.4 per cent in underlying payouts, after mining companies reduced their distributions.
The UK is already a tough place to invest, but its robust dividends have been a key selling point. Does this tip the balance in favour of looking for dividends elsewhere?
UK dividends rose to £92.1bn in 2024. This was a rise of 2.3 per cent on a headline basis, but included £5.6bn of one-off special dividends. Excluding these payments, overall dividends fell year on year, with the mining sector reducing its payouts by 40 per cent to £4.5bn. The mining sector had been the UK’s largest dividend-paying sector between 2021 and 2023.
At best, this is an unexciting picture. However, it is worth noting that UK equity income funds were relatively strong in 2024 in spite of consistent outflows from the UK market. The average fund was up 8.7 per cent. While the average global equity income fund was up 11 per cent, it was still a creditable performance from a sector that is increasingly overlooked.
Equally, the UK market continues to have a markedly higher yield than other countries. The dividend yield on the FTSE All Share is 3.5 per cent. The FTSE World has a dividend yield of just 1.8 per cent, and no other major market comes close to the UK – North America is just 1.3 per cent, Europe 3 per cent and Japan 2.3 per cent. Even the FTSE Small Cap has a yield of 4.2 per cent. The options in the UK market for high income are plentiful.
