(Bloomberg) -- UK companies that returned record dividends to shareholders this quarter are set to slow payouts in the second half, as miners drive a downturn, according to a report.
Payouts increased 11% to £36.7 billion ($47 billion) in the second quarter, as banks basking in the high interest-rate environment led the way. Several companies also distributed business disposal proceeds via larger one-off special dividends, according to share registry company Computershare. Stripped of those distributions, payout growth was just 1%.
With a slower second half in prospect, Computershare has reduced its estimate of overall payments for 2024 to £93.9 billion from £94.5 billion, representing growth of 3.8%. Excluding special dividends, growth is expected to be 0.1%, down from a previous forecast of 1.5%.
Mining companies are choosing to hold back cash instead of rewarding shareholders. All told, they are expected to return £4 billion less than in 2023, offsetting all the underlying growth from the wider market, according to the report. Commodity giant Glencore Plc suspended top-ups to its dividends in order to reduce leverage, according to Bloomberg Intelligence in February.
“Looking beyond mining, we are seeing quite exciting dividend growth at the moment,” said Mark Cleland, CEO of Issuer Services, UCIA at Computershare. “We already know mining dividends are set to be lower in the second half because one or two big companies, including Glencore, have already announced what they will pay.”
Banks made by far the largest positive impact to the second quarter total, led by HSBC Holdings Plc, as high interest rates continued to support profit margins. After banks, the healthcare sector was the second biggest contributer to dividend growth. The weakest sector was housing, which fell 37% year-on-year, due to its exposure to a tough housing market.
Including buybacks, the UK’s listed companies are on course to return capital worth around 6% of national gross domestic product to their shareholders this year, according to Cleland.
Out of 21 sectors studied in the report, 16 saw higher dividends year-on-year on an underlying basis.
--With assistance from Joe Easton and Michael Msika.
©2024 Bloomberg L.P.
