Dividends are the heartbeat of many British investors’ portfolios, but they’ve been on life support since the pandemic.
Now that the global recovery is in full swing, so is the return of the dividend. Here is all the latest information on the biggest UK companies rewarding their shareholders with bumper payouts.
[top_pitch]
What’s going on with British dividends?
UK companies love paying out to shareholders to reward them for their support. Many companies that make up the FTSE 100 use this strategy.
This is why income investors are often big fans of the UK market. However, in times of uncertainty, the dividend can be the first thing that gets slashed.
When the coronavirus pandemic struck, that was exactly what happened. Not only that but some of the biggest dividend payers – banks – were actually stopped from giving investors their usual payments.
That bank freeze has been lifted, and as the economy continues to recover, it’s back to business for many firms that have now resumed their normal dividend schedule. This is great news for investors in the British markets!
How much are UK dividends worth?
Recent research from AJ Bell has looked at the market performance so far this year and broken down analyst expectations for the rest of the year.
According to their report, total dividend payments from the FTSE 100 are forecast to grow by 36% this year to £84.1 billion. This amount is only slightly short of the pre-pandemic peak.
However, new projections expect the total amount could hit £93 billion due to the inclusion of ‘special dividends’. You can think of these as bonus dividends.
Who are the biggest dividend payers?
What’s especially interesting is that the majority of this growth in the UK is expected to come from just ten firms.
Here are the ten companies that are forecast to generate 80% of 2021’s dividend increase:
| Company | Total dividend (£ million) | Dividend yield |
| Rio Tinto | 10,813 | 17.8% |
| British American Tobacco | 4,966 | 8.1% |
| Royal Dutch Shell | 4,739 | 4.2% |
| BHP Group | 4,594 | 11.3% |
| GlaxoSmithKline | 4,004 | 5.7% |
| Unilever | 3,725 | 3.6% |
| Anglo American | 3,490 | 9.5% |
| HSBC | 3,364 | 4.4% |
| BP | 3,142 | 5.1% |
| AstraZeneca | 3,116 | 2.5% |
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What does this tell us about British dividends?
It’s no surprise that most of these companies are high up in the FTSE 100. So, if you were to invest in a FTSE 100 fund, most of your investment would be going towards these businesses.
What’s interesting to see is that the bulk of big dividends are coming from just a few industries. The main protagonists here seem to be mining, oil and banking.
So although these bulky dividend payouts are great, if you’re investing in more socially responsible investments you may not see the same kind of surge.
Rising energy prices and a boom in commodities is partly behind the big windfall of cash for some of these companies. However, you probably shouldn’t expect this kind of performance to become the norm.
How can you invest in UK dividends?
There are plenty of different ways you can scoop up some extra dividends. Using a share dealing account, you can pick out individual companies that reward shareholders or you can choose a fund or investment trust that focuses on income.
If you’re still at the wealth-building stage, it’s always worth reinvesting any payouts. This is what’s going to help you compound your gains and make a lot more money over time.
Whatever route you choose, using a stocks and shares ISA to hold your investments will mean that you don’t have to pay any tax on dividend income, which is another bonus!
Remember that all investing carries risk. Dividends are an important part of the markets, but payouts are not guaranteed. So make sure you stay diversified and have realistic expectations.
