UK dividends dropped by 44% year-on-year in 2020 to £61.9bn, according to Link Group’s most recent Dividend Monitor*. The lowest annual total since 2011, it was nevertheless boosted by a better-than-expected Q4, which saw suspended payouts restored. The financial sector accounted for two-fifths of the cuts, the most significant contributor. Oil dividend cuts contributed another fifth. Less affected were dividends from FTSE 100 companies, with underlying dividends falling by 35%; mid-caps’ payouts fell by 56%.

Cause for hope?

Forecasts suggest that payouts could rise by 8.1% on an underlying basis, yielding £66bn in 2021; in a worst-case scenario, they could fall by 0.6% to £60.7bn. CEO Corporate Markets of Link Group, Susan Ring, commented: “There are reasons for optimism, but the resurgent pandemic has pushed back the reopening of the economy even further. We still believe the worst is past, but a new lockdown means our expectations for 2021 are significantly more subdued.”

*Link Group, 2021