UK dividends increase but concerns rise over mining payouts

The outlook for dividends from UK companies has been clouded by expectations that payouts from mining groups have peaked, according to an industry report.

Total dividends from UK-listed companies rose by 38 per cent in the second quarter, compared with the year before, hitting £37bn, according to the report from funds group Link.

Analysts increased their forecast for shareholder payouts this year, partly because of the weak pound. But they warned that core dividends, which exclude one-off specials, could weaken as mining companies cease to provide a key boost to growth in payouts from UK companies.

“Mining payouts are closely linked to the cyclical fluctuations in mining profits and tend to rise and fall much more over that cycle than dividends from other industries. Concerns over global growth have pushed commodity prices sharply lower in recent weeks, though they remain high in historic terms,” said Ian Stokes, managing director, corporate markets UK and Europe at Link.

“If mining dividends have indeed now peaked, they will act as a brake on UK dividend growth in the next 12 months, having provided the main engine over the last 24,” he said.

Mining payouts contributed a quarter of the total payouts in the three months to the end of June. Oil companies and banks remain the UK market’s other key payers, supported by a good quarter for the broader corporate sector.