Dividends back rising again as Covid-19 restrictions ease

Dividend payments from companies are starting to reflect the opening up of the UK economy after Covid-19, according to the latest data from registrar Link.

Annual payments are still running below the previous year, with the first quarter of 2021 down 26.7% to £12.7bn on a year earlier.

But the decline was the lowest since the pandemic started and half of the companies either raised or restarted payments.

It was also the second-highest period on record for special dividends and including these, there was a rise of 7.9%.

Oil companies, at £5.8bn, accounted for the bulk of cuts in the past three months.

On a rolling twelve-month basis, dividends have now been cut by 41.6% or £44.8bn, as two-thirds of companies made reductions but Link is expecting potentially a bigger bounce back than previously forecast for 2021.

With the banks allowed to pay out again, Link has raised its worst-case estimate to plus 0.9% though the best case estimate also reduced to £66.4bn.

AJ Bell adds that share buybacks have also been increasing with metals group () announcement today of a £200mln programme taking the total this year to more than £4bn.

Of these, Natwest Group PLC () and () account for almost £2bn.

Russ Mould, the wealth platform’s investment director, said:  “Buybacks do seem to be coming back into favour. In some ways, investors’ desire to see ‘efficient’ balance sheets once more, that carry little, low-earnings cash, is remarkable just a year after they were craving financial solidity above almost all else.

“The London-quoted Global Buyback Achievers Exchange Traded Fund (ETF), which aims to deliver the share price performance the NASDAQ Global Buyback Achievers index, plunged last year but has almost doubled from its lows, easily outpacing the FTSE All-Share in the meantime.”