UK dividends are set for a £5.7bn boost this year due to the recent surge in the US dollar, according to the quarterly data from financial services group Link.
Total dividends fell by 8.4% to £31.4bn in the three months to September, but this reflected mining company BHP’s delisting from the London Stock Exchange.
Stripping that out, dividends were up 1% year-on-year, being boosted by £1.9bn due to a weaker pound with underlying dividends rising 4% to £28.1bn.
Link highlighted that many dividends being declared in dollars meant the weakening pound “enormously flattered” the figures.
Banks led the way in the last three months with a 49% increase in the amount paid out followed by the oil and gas sector.
For 2023, Link expects modest underlying growth but a drop in the headline number.
Managing director, Ian Stokes said: “For the first time in more than a decade, the UK 10-year gilt yield has risen above the yield on UK equities, even if only briefly. Suddenly income investors have more choice.
“Nevertheless, the high yield of the UK stock market signifies that more of the value of UK equities is grounded in the stream of dividends it provides.
“Moreover, we do expect UK companies to continue to deliver dividend growth over the medium and long term, which provides a level of insulation against the rising cost of living.”
This year Link forecasts underlying dividends rising by 13.4% to £87.2bn, while headline dividends will see a slight drop from £97.4bn.
Equities will yield 4.2% over the next year, according to the group, due to lower share prices and a stable outlook for payouts.