'Brighter' outlook for UK dividends despite sharp fall in in one-off payouts

UK company dividends fell at the beginning of 2025 due to fewer one-off payouts and significant cuts by just a handful of firms.

However, analysts expect prospects for investor payouts by London-listed companies to improve over the coming months despite ongoing equity market volatility.  

Firms distributed £14billion in dividends to shareholders in the first quarter, a headline year-on-year decline of 4.6 per cent, according to Computershare’s latest dividend monitor report.

Special dividend payments more than halved to £417million, which Computershare said was ‘less severe’ than anticipated but nonetheless reduced the headline growth rate by 3.3 per cent.

Meanwhile, cutbacks by just three businesses – Vodafone, Burberry and Bellway – struck a further five percentage points off the total.

Vodafone slashed its payout in half to help fund investment in new mobile networks, resulting in dividends by the telecoms sector plunging by 43 per cent to £717million.

In addition, Burberry has suspended dividends since last July following a slowdown in demand for luxury goods, while Bellway lowered its payments amidst challenging conditions in the housing market.

Computershare’s Mark Cleland said: ‘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.

‘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.’

AstraZeneca continued to be the highest dividend payer, having recently hiked its dividend by 6.6 per cent after enjoying soaring profits and revenues last year thanks to soaring demand for their cancer and respiratory drugs.

Energy majors Shell and BP were the second and fourth-biggest payers, respectively, while British American Tobacco was third and Hellman’s Mayonnaise owner Unilever was fifth.

Pharmaceutical companies made the largest contribution of any sector, followed by industrials businesses, with Ashtead Group delivering a significant payment before its primary stock market listing moves to the United States.

Computershare said the prospects for dividend payments in the second quarter ‘look brighter’, spearheaded by banks and food retailers.

Consequently, it has raised its forecasts for annual underlying dividend growth from just 1 per cent on a constant currency basis to 1.8 per cent, equating to regular dividends of £85.6billion.

Cleland said: ‘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.’

The financial administration specialist also calculated that firms made £63.2billion in share buybacks during the first quarter.