The year ahead will see dividends rise slower than in 2022, as economies around the world are set to shrink.
Mining payouts, which have been a powerful engine of growth in the past two years, are likely to fall, though the extent of this decline is uncertain, according to Link.
Across the wider market, the drag from 2022’s record share buybacks will hold back dividend growth by at least 1%.
Link expects underlying dividends of £86.2bn in 2023, an increase of 1.7%, year-on-year.
On the assumption that special dividends revert to a typical year average, headline payouts will fall 2.8% to £91.7bn.
It also expects UK plc to yield 3.7% for the next 12 months.
The rally in share prices in recent weeks has pushed yields down, narrowing the gap between equity yields and other assets to the narrowest in more than a decade.
Fixed income offers 3.6% today, based on the UK 10-year gilt and instant access savings of 2.7%. This time last year they offered 1.2% and 0.7%, respectively.
UK dividends ended 2022 8% higher with £94.3bn in payouts.
During 2022, almost every sector delivered growth, while the weakness of the pound provided an additional £3.8bn boost to payments declared in dollars.
Mid-caps grew their dividends faster than the blue chips as they recovered sharply from steep pandemic cuts.
Moreover, companies bought back record numbers of their own shares, equivalent to 2% of UK plc’s market capitalisation, and more than half the value of dividends paid during the year.
Resurgent banking dividends were the most significant driver of growth in 2022, accounting for a quarter of the underlying increase during the year.
Elsewhere, booming energy prices pushed oil payouts a fifth higher, despite huge share buybacks presenting an alternative route for surplus capital to reach shareholders.
Comments