The amount of cash pocketed by shareholders slumped over the summer as frothy one-off dividends dried up and mining giants reined in their payouts.
A steep decline in one-off special dividends and sharp cuts from mining firms pulled down the total paid by 8.3 per cent to £27.5bn in the third quarter, according to the latest dividend monitor from Computershare.
Regular dividends, which exclude one-off special payments, totalled £26.6bn, up 2.4 per cent on an underlying basis.
Mining firms ramped up their payments through the pandemic as swinging commodity prices pushed up profits in the sector. However, the sector made by far the biggest dent in third quarter total, knocking almost five percentage points off the growth rate as its dividends tumbled by almost a quarter year-on-year.
“Current reductions from mining companies are masking much better growth from the wider market, with the fourth quarter already delivering very encouraging growth,” said Computershare executive Mark Cleland.
“Most mining companies typically pay dividends that vary with the commodity cycle, meaning payouts can rise and fall dramatically.
“However, there is significant uncertainty about the outlook beyond 2023, and the extent to which UK and global economies respond to the rising cost of finance and tighter credit conditions will be an important driver of company earnings and therefore dividend growth.”
Growth in payouts was markedly better outside the mining sector, reaching 7.2 per cent on an underlying basis.
The utility sector also paid out a record-breaking £2.7bn and made the strongest contribution to growth on the back of inflation-linked policies.
The picture could be looking more positive for shareholders in the months ahead. Higher growth rates outside the mining sector mean the dividend monitor’s forecast for the fourth quarter has been hiked upwards, although further declines in mining and a continued slide in one‑off special dividends have dented the total figure.
The Dividend Monitor now expects headline dividends, including one-off special payments, to fall by 3.4 per cent to £90.6bn in 2023.
The more significant underlying growth rate now looks set to reach 5.4 per cent for the year, meaning regular dividends are expected to rise to £88.5bn.