Despite a 4.6% fall in UK company dividends during the first quarter of 2025 there are encouraging signs that could reassure investors, lenders and mortgage market participants alike.
According to Computershare’s latest Dividend Monitor, UK companies distributed £14.0bn in dividends over Q1, a slight decrease largely due to fewer special dividends and specific cuts from firms including Vodafone, Burberry and Bellway Homes.
Adjusted for these one-off factors, underlying dividends were down just 0.2% year-on-year, a significantly better outcome than many had forecast.
Crucially, sectors underpinning consumer and business confidence – such as healthcare, food, industrials, and leisure – delivered strong dividend growth.
Pharmaceutical giants like AstraZeneca and GSK led the way, capitalising on strong sales performance, while EasyJet made the largest contribution within leisure and travel, buoyed by improved profitability.
The typical, or median, dividend growth stood at a solid 3.3%, with more than 80% of companies either raising or maintaining their payouts year-on-year – a clear signal of resilience amid broader market volatility.
BRIGHT PROSPECTS
Looking ahead, the Dividend Monitor points to a brighter outlook for Q2, especially among banks and food retailers – sectors closely watched by mortgage lenders as indicators of consumer health and spending power.
Computershare has upgraded its forecast for 2025 underlying dividend growth from 1.0% to 1.8%, projecting regular dividends to reach £85.6bn.
However, headline dividend growth is now expected to flatline at 0% for the year (down from 0.7%), as the strength of the pound trims the sterling value of overseas payouts. Total 2025 shareholder payouts, including specials, are forecast to hit £90.1bn.
SHARE BUYBACKS
Adding to the positive narrative, UK companies accelerated share buybacks during the second half of 2024, lifting the annual total to £63.2bn – £3.5bn higher than the previous year. When combined with dividend payments, total shareholder remuneration for 2024 reached £153.4bn, up from £148.5bn in 2023.
MARKET UPHEAVAL
Mark Cleland, CEO of Issuer Services UK, Channel Islands, Ireland and Africa at Computershare, said: “Dividends are typically less likely than company profits to experience short-term fluctuations either during economic turbulence or in boom times, as most companies seek to deliver steady income growth over time for their investors.”
“Nevertheless, any cooling driven by the current upheaval in financial markets and the real global economy is likely to affect profits and this will subsequently knock on to dividend payouts.
“We are unlikely to see much effect on regular dividends in the next couple of quarters, but discretionary special dividends particularly have proven more vulnerable to economic difficulty historically.”
