Dividends down 44% year-on-year

UK dividends fell 44% in 2020 to £61.9bn, the lowest annual total since 2011, according to Link Group’s latest Dividend Monitor5. However, a better-than-expected Q4 was boosted by suspended payouts being restored.

The biggest impact came from the financial sector, which contributed to two-fifths of cuts, while oil dividend cuts accounted for another fifth. Dividends from the FTSE 100 were less severely impacted by the pandemic, with underlying dividends falling 35%, while mid-caps saw them drop 56%.

Reasons for optimism

Looking ahead, payouts could rise 8.1% on an underlying basis, yielding a total of £66bn in 2021, while a worst-case option suggests payouts could fall around 0.6% to £60.7bn.

Susan Ring, CEO, Corporate Markets of Link Group, said, “There are reasons for optimism, but the resurgent pandemic has pushed back the reopening of the economy even further. We still believe the worst is past… our expectations for 2021 are significantly more subdued.”

5BlackRock, 2020

It is important to take professional advice before making any decision relating to your personal finances. Information within this newsletter is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Taxation depends on individual circumstances as well as tax law and HMRC practice which can change.

The information contained within this newsletter is for information only purposes and does not constitute financial advice. The purpose of this newsletter is to provide technical and general guidance and should not be interpreted as a personal recommendation or advice.

The Financial Conduct Authority does not regulate advice on deposit accounts and some forms of tax advice.