Shareholders enjoyed bumper payouts last year as dividends rebounded from a pandemic slump to hit £94.1bn, new figures have revealed.
Payouts surged more than 46 per cent on 2020 levels, bolstered by a record number of frothy one-off special dividends which boosted the headline total by a record £16.9bn, three times their normal level, according to the latest Dividend Monitor from financial IT firm Link Group.
Underlying payouts also rose by 21.9 per cent to £77.2bn in 2021, driven by strong boost in the second and third quarters of the year which took the total payouts to levels not seen since mid-2017.
Underlying growth slowed in the final three months of the year, but a blockbuster special dividend from Daily Mail owner DMGT took the headline total to £14.1bn, 26.1 per cent higher year-on-year than 2020.
Ian Stokes, managing director of corporate markets at Link said: “The recovery in UK dividends is not complete, but the easiest part of the catch up is now behind us.
“As the pandemic continues, it would be easy to take a knife to our expectations for dividends for the coming year. We are, however, cautiously optimistic that most sectors can deliver growth.”
Stokes predicted that banks and oil companies would be the main “engines of progress in 2022” after mining companies fuelled the boom in payouts in 2021.
Mining investors enjoyed a bumper year with profits in the sector driving dividends to three times larger than the long term average.
Reinstated banking payouts also bolstered the overall rebound last year after they were curtailed in 2020 as the economy battled the worst of the pandemic.
Banks cut nearly £8bn in payouts in March 2020 before they were reinstated eight months later. Airlines, leisure and travel, which have felt the worst impacts of the pandemic cut payouts by four fifths for the second year running in 2021, while oil dividends were lower because reductions in 2020 took place later in the year.
Link Group warned that a combination of inflationary and covid-related headwinds combined with a slowdown in the mining sector may mean that the dividend boom is coming to an end this year.
The firm predicted that the departure of multi-national mining giant BHP would restore balance to the UK payouts index.
Stokes said: “The dominance of big mining groups has overshadowed the income generating capacity of the broader market and left UK payouts too heavily dependent on a single, highly cyclical sector.”
Link has forecast underlying growth of dividends of 5 per cent bringing total payouts to £81bn this year.
The resurgence in UK dividends reflects a wider trend seen across the continent as new figures reveal European investors enjoyed a similar uptick in returns.
After a slump in dividend payments in 2020, companies in the European equity index MSCI Europe raised their payouts again last year by around a third, to a record €378 billion, according to Allianz.
The firms said it was anticipating an 8 per cent hike in European dividends in 2022, which will lead them to hit record highs.
Dr Hans-Jörg Naumer, head of global capital markets, said: “Dividends continue to make a substantial contribution to return on equities in Europe.”