UK Dividend Monitor Q4 2022

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The UK economy is in its third recession since our Dividend Monitor was first published fourteen years ago. 

In edition 52, we look at how 2022 and its final months shaped up and consider the outlook for 2023.

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UK DIVIDENDS ROSE 8.0% in 2022 BUT FACE HEADWINDS FOR 2023

  • UK dividends rose 8.0% to £94.3bn on a headline basis, with growth held back by a one third decline in one-off special dividends
  • Underlying payouts, which strip out special dividends, rose 16.5% to £84.8bn
  • Record share buybacks equalled 2% of UK market capitalisation in 2022 and were exerting a noticeable drag on dividends by year-end
  • Q4 payouts rose 7.0% on an underlying basis but the headline total was impacted by lower special dividends and a recovery in the pound
  • Underlying dividends set to rise 1.7% to £86.2bn but headline payouts will decline 2.8% to £91.7bn as one-off specials are likely to be lower

Ian Stokes, Managing Director, Corporate Markets UK & Europe at Link Group said:

“The economic skies are decidedly gloomier both in the UK and around the world than this time last year. Company margins in most sectors are already under pressure from higher inflation and squeezed household budgets. Soaring interest rates are now crimping profits by raising debt-service costs too. This will leave less money for dividends and share buybacks in many sectors.

“We do expect underlying dividends to grow in 2023, however. Even with lower mining payouts, there is good growth coming through from the banks and oil producers and across the wider market, cuts made during the pandemic mean payout ratios are conservative on the whole. Companies would also rather reduce share buybacks than cut dividends as cutting dividends is a very negative signal to give to the market. With the former so high, there is plenty of wiggle room. Finally, UK plc enters the recession with profits at a comfortable level compared to dividends and this will provide support.”

Ian Stokes

Managing Director, Corporate Markets EMEA

Tel: +44 (0)7732 094692

Email Ian Stokes