Special dividends and a weak pound lead to record shareholder payouts in 2019

The political and economic uncertainty that dominated the majority of 2019 barely dented the prospects of investors in the stock market, according to new data.

Dividends paid out by companies on the London Stock Exchange to shareholders hit new record highs last year, with £110.5 billion paid out, Link Group’s Dividend Monitor has found.

This included banks handing out larger payouts than 2007 – the first year since the financial crisis for this to happen – in a sign that the sector appears to be putting the crunch behind it.

Overall, dividends jumped 10.7% to help investors earn an average of £1.02 for every £20 invested in the stock market – more than double the levels of a decade ago, Link said.

Payouts were also boosted by a trebling of special dividend payments to £12 billion and with two fifths of UK dividends paid out in US dollars, the weak pound helped boost the value by £2.4 billion in the first three quarters of the year.

But Link warned that dividends in 2020 are likely to fall to £102.7 billion due to fewer special dividends and a stronger pound impacting the value.

The highest dividend-paying companies were in mining, banks and IT – with the three accounting for three quarters of the total paid.

Housebuilders, hotel and leisure companies, and industrials also made a significant contribution – including £2.5 billion handed to shareholders in Whitbread, after the Premier Inn owner sold its Costa Coffee business to Coca Cola.

The biggest paying sector – oil, gas and energy – showed no growth in 2019 as companies use higher oil prices to rebuild dividend cover.

Miners had less qualms about holding onto spare cash, with huge special dividends from Rio Tinto and BHP.

The banking sector also made a significant contribution to growth in 2019 with dividends up by a third to £15.6 billion.

But investors in telecoms suffered the most, with total dividends paid falling by over a quarter year-on-year following a dividend cut from Voadfone, and a sector concerned by high levels of investment required in infrastructure projects.

Researchers at Link said they do not expect such large special payouts this year and if the pound maintains the higher levels at which it ended 2019, it will reduce the value of the dividends.

Michael Kempe, chief operating officer at Link Market Services, said: “The spice of huge special dividends and the zest of big exchange-rate gains enlivened what was in truth a rather bland year for UK dividends. 2020 is not set for the same superficial excitement.”