UK dividend payouts reflect robust bank profitability
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UK dividend payouts reflect robust bank profitability

The domestic economy is flatlining while interest rates continue to rise, but the booming banking sector has helped overall UK corporate payouts keep pace with those elsewhere.

Illustration: iStock

The latest quarterly dividend monitor published in late July by Computershare notes that although UK dividends fell 9% on a headline basis to £32.8 billion in the second quarter on the back of sharply lower one-off special dividends, regular dividends rose by more than expected – 3.5%, to £32.2 billion.

The UK banking sector alone paid out £7.8 billion and is expected to make the largest contribution to dividend growth for the full year.

“The dividend outlook has brightened in the short term,” says Mark Cleland, CEO issuer services United Kingdom, Channel Islands, Ireland and Africa at Computershare. “Banking profits are soaring as they benefit from higher interest rates, and dividends are following suit. Outside the banking sector, companies with pricing power are building margins, contributing to inflation but in turn boosting their dividend firepower, and there are small pockets where dividends are still catching up after cuts made during the pandemic.”

Russ Mould, AJ Bell

According to AJ Bell’s July dividend dashboard, 2023 is on track to be the third best year ever for cash returns from the FTSE100.

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