UK dividends reached a record £99.8bn in 2018, 5.1% higher in headline terms compared to 2017 and just missing the £100.0bn mark by a whisker, according to the latest Dividend Monitor by Link Asset Services.
The fourth quarter marks a seasonal low for dividends. Even so the total reached a record for the fourth quarter, rising 15.6% in headline terms to £17.3bn. Underlying dividends were 15.7% higher at £16.8bn. Excluding other one-offs, Q4 dividends rose by a tenth.
For the full year, a higher payout from the enlarged British American Tobacco made the single largest contribution to growth, but the mining sector collectively accounted for most of the increase. Banking dividends also did well, marked by the restoration of RBS’s payout after ten years, and Standard Chartered’s. Nine out of ten sectors raised payouts.
Plunging share prices in the fourth quarter combined with rising dividends to produce the highest yield for UK equities since March 2009, in the depths of the recession when they also hit 4.8%. Over the next year, shares will yield a collective 4.8%, based on our new forecast. The top 100 will yield 5.0%, and the mid-caps 3.3%. Before that, yields were last this high during the 1991 recession, according to The Barclays 2018 Equity Gilt Study. This time last year, by contrast, the collective UK equity yield was 3.6%.