UK dividends on track to reach prepandemic level next year

• Basic Resources companies lead to a surge in the FTSE All-Share aggregate dividend payout, but the pace of recovery varies across sectors.
• The aggregate dividend fell 43% in 2020, from GBP111 billion in 2019 to GBP63 billion. The 45% rebound in 2021 remains below its precrisis level, undermined by weaker sectors such as Oil & Gas, Banks, and Travel & Leisure.
• Basic Resources are set to make the largest comeback with a GBP13-billion increase in the dividend from 2020 to 2021, followed by Banks and Industrials with GBP6 billion and GBP2 billion, respectively.
• Despite some health-crisis disruptions, HSBC, Shell, and BP remained part of the top dividend payers this year, along with Rio Tinto, Tesco, British American Tobacco, and BHP. In 2021, the top 15 should represent more than 60% of the total index aggregate payout.
• With remaining risks coming from unannounced dividends by Ferrexpo, Tesco and Kingfisher, 2021 is not over yet. Moreover, the dividend tax hike of 1.25% could also see companies push payment dates to fall before the new tax year begins in April 2022.

UK aggregate dividends struggle to surpass prepandemic levels

In 2019, the aggregate dividend paid by UK companies stood at GBP111 billion, but the resulting hardships brought on by the pandemic sunk that amount to GBP63 billion in 2020. Despite vaccine progress and the reopening of the UK economy, the total dividend is still not expected to reach its 2019 level this year, remaining 18% lower. Its languishing is largely due to the decline in the Banking sector, despite resumptions in dividends, new dividend policies, and rebased amounts meaning moderate increases expected from the Banks sector. Other sectors, such as Travel and Leisure, are set to experience a delayed recovery as continuing COVID-19 effects are expected to hamper profits past 2022. Although UK dividends have not fully recovered, the UK aggregate dividend payout should jump from GBP63 billion to GBP92 billion in 2021. This GBP29-billion rebound (including one-off payments) predominately came from Basic Resources' performances, banks' dividend resumptions, and Tesco's extra payments of GBP5 billion. Looking forward, IHS Markit anticipates Oil & Gas as well as Telecommunications companies to be part of the growth drivers for next year.

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Posted 30 September 2021 by Clara Besson, EMEA Dividend Research Lead Equity Data & Analytics IHS Markit and

Deborah Idowu, Research Analyst, IHS Markit

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