Investor income boosted by ‘special dividends’
UK dividends climbed to £34.9bn in Q3 2021, an 89% year-on-year rise, according to the latest UK Dividend Monitor5. Sizeable one-off special dividends were partially responsible for the increase, a trend expected to be evident in Q4 too; however, the underlying total in Q3, excluding specials, leapt up 52.6% to £27.7bn. In context, this large year-on-year rebound is set against a pandemic-hit Q3 2020, in which dividends halved.
Ian Stokes, Managing Director of Corporate Markets at Link, commented on the data, “The good news is that we have consistently seen companies deliver more in dividends than we thought likely at the beginning of the year… Companies were progressively less impacted by each lockdown and many of them took action to bolster their balance sheets during 2020… Dividend firepower is now much stronger as a result.”
In reference to the prevalence of special dividends, he continued, “The boom in special dividends reflects how some companies are making catch-up payments, some are capitalising on very strong demand, and others are seizing the moment to sell assets at a time of high prices and numerous cashrich potential buyers.”
Although this is good news for income investors, dividend growth may be driven by sectors which might not do as well in the future, which is why it’s important to diversify across different sectors.
5Link Group, 2021
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