UK companies paid out a record £110.5bn in dividends in 2019, which was 10.7% up on 20182. This may be good news for income investors, although higher payouts will mean more investors are subject to Dividend Tax, unless investments are held in tax efficient wrappers.
Ongoing uncertainty around Brexit throughout the year, which resulted in comparative sterling weakness against the dollar, meant that dividend returns were boosted due to many UK dividends being declared in US dollars. The record figure was also artificially increased by an exceptionally large £12bn of ‘special dividends’ – particularly from the banking, mining and IT sectors.
Once currency factors and special dividends have been taken out of the equation, underlying dividends saw a modest rise of just 2.8% in 2019, which is the slowest growth since 2014. So, experts were already warning investors not to expect the same in 2020, even before the COVID-19 outbreak.
2Link Assets, 2019