The cash keeps flowing from Britain’s biggest companies, even if dividends are stuck in the slow lane.
AJ Bell’s latest Dividend Dashboard shows FTSE 100 payouts for 2025 are barely moving, nudging up just 1% to £79.4 billion.
But share buybacks are doing the heavy lifting, with another £50.9 billion already signed off this year, putting total returns to shareholders on course for £130 billion – a yield of 5.5% once you add it all up.
That sets the tone for the UK market right now: solid cash back to investors, but little in the way of dividend growth. The forward yield on the FTSE 100 has slipped to 3.3% thanks to the rally in share prices, meaning income hunters are not getting quite as much bang for their buck.
UK still cheap
Russ Mould at AJ Bell says the UK still stacks up cheaply against the US. American shares trade on 25 times earnings, compared with 15.4 times for London’s blue-chips.
The gap is unusually wide, even if the FTSE’s valuation is now back in line with its long-term average. With Wall Street leaning heavily on a handful of AI-linked names, UK equities may look like a useful counterbalance.
But profits are drifting. Forecasts for the FTSE 100’s total pre-tax income in 2025 have slipped 3% in the past three months to £224 billion, 13% lower than a year ago. It may take until 2026 for earnings to top the £231 billion peak hit in 2022.
Financials, oils and miners remain the heavyweights, providing more than half of profits and nearly half of dividends, underlining the UK’s dependence on global cycles rather than domestic demand.
Cover for dividends is also thinning. The ratio of earnings to payouts has dropped below two times for the first time since Covid, now at 1.96.
Healthier
That is still healthier than in the dividend-cutting years of 2015–16, but the direction will not reassure cautious investors.
Analysts expect only three companies to trim payouts this year, Rio Tinto, Anglo American and WPP, but concentration risk looms large, with just 10 firms responsible for more than half of all dividends.
Currency adds another wrinkle. A stronger pound reduces the value of dollar- and euro-denominated dividends from about 30 FTSE 100 constituents, further dampening headline growth.
Even so, there are chunky yields on offer. Legal & General leads the pack at 9.3%, followed by Phoenix Group at 8.4% and M&G at 7.9%.
Too good to be true?
Property names Land Securities and LondonMetric are also in the mix. But AJ Bell reminds investors to be wary of payouts that look too good to be true: anything more than double the risk-free gilt yield, now around 4.6%, deserves extra scrutiny. By that measure, only L&G is flashing amber.
The bigger picture is that companies are giving more back than they are raising. Just £4.7 billion has been tapped from investors this year in new share issues, dwarfed by the £130 billion heading out in dividends and buybacks.
As Mould notes, bull markets tend to end when the money dries up – and right now, UK plc is still keeping shareholders well fed.