UK dividends dip as mining sector cuts payouts, despite overall growth in 2024

In 2024, UK dividends experienced a 0.4 per cent decrease on an underlying basis after mining companies cut payouts by 40 per cent compared to the previous year. Despite headline dividends in 2024 increasing by 2.3 per cent to £92.1bn, this was largely due to a surge in one-off payments amounting to £5.6bn.

Underlying or regular dividends dropped to £86.5bn, primarily due to a £4.5bn reduction in payouts by mining stocks, which had been the largest paying sector over the preceding three years, as reported by City AM.

Excluding miners, underlying growth in UK dividends for 2024 stood at four per cent, while headline growth was 8.4 per cent, as per data from Computershare’s Dividend Monitor report.

Housebuilders also contributed to the decline in the total dividend, with FTSE 100 giant Persimmon and FTSE 250 member Bellway both reducing payouts throughout the year. Overall, 17 out of 21 sectors saw increased or maintained payouts in 2024, with banks, insurers and food retailers being the strongest contributors to growth.

Conversely, the final quarter of 2024 witnessed a 0.1 per cent rise in underlying dividends while headline figures fell by 0.5 per cent. Looking ahead to 2025, Computershare estimated that median dividend growth should continue at a rate of between four to 4.5 per cent.

However, it highlighted that significant cuts have already been announced by several major firms, such as the soon-to-be-merged Vodafone/Three, which are likely to bring down the headline figures.

As a result, it is predicted that underlying dividend rates will see a modest increase of just one per cent to £88.2bn, while headline rates are anticipated to rise by a mere 0.7 per cent to £92.7bn.

David Smith, portfolio manager at Henderson High Income Trust, commented on the potential impact of the UK Budget: "The impact of the UK Budget is likely to curtail dividend growth for some domestic businesses given corporate margins are coming under pressure from the increase in National Insurance and minimum wage."

He also pointed out the international aspect of the UK market, stating, "However, one must remember that 75 per cent of the UK market’s revenues are derived overseas where the global economy is improving."