UK company dividends fell 4.6% to £14 billion in the first quarter of the year due to reduced special dividends and cuts from three companies (Vodafone, Burberry and Bellway), with the underlying fall just 0.2%.
This is according to Computershare's latest dividend monitor report, which sees positive signs for the second quarter, though renewed strength in the pound against the dollar potentially depressing headline dividend growth for 2025 as a whole.
Median dividend growth per share was 3.3% in Q1, with 82% of companies increasing their dividends or holding them steady year-on-year.
"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," said Computershare's Mark Cleland.
"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.
"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."
While banks and food retailers were expected to be the key contributors in the second quarter, Computershare cut its forecast for headline dividend growth is to zero from 0.7% for the year.
This is expected to result in total payouts, including special dividends, as the effect of a stronger pound reduces the sterling value of dividends declared in dollars.
Underlying growth, measured on a constant currency basis, was upgraded to 1.8% from 1.0%.
A higher pace of buybacks - accelerating markedly during the second half of the year - meant total shareholder remuneration in 2024 rose to £153.4 billion from £148.5 billion the year before.