UK company dividends experienced a decline at the beginning of 2025, driven primarily by a reduction in one-off payouts and significant dividend cuts from a small number of firms, according to the latest dividend monitor report from Computershare. Despite this downturn, analysts remain cautiously optimistic about the outlook for investor payouts from London-listed companies in the coming months, even as equity market volatility continues.
In the first quarter of 2025, UK firms distributed £14 billion in dividends to shareholders, marking a 4.6 per cent decrease compared with the previous year. The report highlighted that special dividend payments were particularly affected, more than halving to £417 million. Computershare noted this drop was "less severe" than initially anticipated but still detracted 3.3 percentage points from the overall dividend growth rate.
A significant factor in the decline was dividend reductions by three major companies: Vodafone, Burberry, and Bellway, which collectively accounted for a five percentage point reduction in total dividends paid. Vodafone notably halved its dividend to fund investments in new mobile networks, causing dividends from the telecoms sector to plummet by 43 per cent to £717 million. Burberry has suspended dividend payments since July of last year amid a slowdown in demand for luxury goods, while Bellway cut its dividends in response to challenging conditions in the housing market.
Mark Cleland of Computershare commented on the broader implications: "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."
Among the top dividend payers, AstraZeneca maintained its position as the highest payer, having recently increased its dividend by 6.6 per cent following robust profits and revenues, buoyed by strong demand for its cancer and respiratory drugs. Energy giants Shell and BP ranked second and fourth, respectively, while British American Tobacco and Unilever, the owner of Hellman's Mayonnaise, were third and fifth.
The pharmaceutical sector was the largest contributor to dividends overall, closely followed by industrial companies. Ashtead Group stood out for delivering a significant payment ahead of its planned primary stock market listing shift to the United States.
Looking ahead, Computershare expressed a more positive outlook for the second quarter, particularly for banks and food retailers, prompting the firm to revise its forecast for annual underlying dividend growth upwards from 1 per cent to 1.8 per cent on a constant currency basis, equating to regular dividends of £85.2 billion. Cleland further noted, "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."
In addition to dividend payments, companies returned £63.2 billion to shareholders through share buybacks in the first quarter of 2025, according to Computershare.
Source: Noah Wire Services