Banks to lead way on dividends in 2022 but recovery in payments is

Huge payouts by miners and a resumption in distributions by the banks helped UK dividends bounce back strongly in 2021 after widespread Covid disruption, but the pace is starting to slow.

Stripping out the specials, underlying payments rose by 21.9% to £77.2bn in 2021or back to 2015 levels, according to the latest report by Link Group, but the underlying improvement slowed to 13.5% in the final quarter.

Link predicts underlying growth will be 5% in 2022 or 8.9% adjusting for mining giant BHP’s departure from the London market.

Ian Stokes, Managing Director, Corporate Markets UK and Europe said: “The recovery in UK dividends is not complete, but the easiest part of the catch up is now behind us.

“2022 faces a number of headwinds in the form of omicron disruption, inflation, and tax hikes and that adds uncertainty to our forecast.

“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.

Total payouts during 2021 totalled £94.1bn, a 46& improvement on 2020, and boosted by a jump in special dividends to £16.9bn or three times the normal level.

Restored banking dividends made a ‘very large’ positive impact, added the report, and most sectors saw growth though it was mining that led the way with payouts three times the previous norm.

Laggards included the sectors most badly affected by Covid with airlines, leisure and travel cutting distributions by four-fifths while telecoms was hit by BT’s dividend cut.

Banks and oil companies will provide most of the impetus in 2022  suggests Link, which does not believe miners will be able to sustain their recent pace, though the departure of BHP to the ASX will give the UK index a better balance.