Dividend growth rises

30th April 2020

In the current climate, there is uncertainty in all of our lives with both health and financial concerns. However, while we are all understandably focusing on the here and now, it might be worth using this time to take a step back and review your long-term financial wellbeing as well. This newsletter takes a look at some of the areas you might want to consider. Of course, we are on hand to support you through any challenges ahead.

Stock market investors had a bumper year for income in 2019, as UK companies paid out a record £110.5bn in dividends. Research1 shows that dividend growth was up 10.7% on 2018 for two main reasons: a generally weak pound and an exceptional year for ‘special dividends’.

Because many UK dividends are declared in US dollars, returns were boosted by comparative sterling weakness due to Brexit uncertainty. The main contribution to the record dividend payout, however, was the exceptionally large £12bn of ‘special dividends’ – particularly from the mining, banking and IT sectors.

Temper 2020 expectations

Experts warn investors against ‘superficial excitement’. When 2019 performance is reviewed with currency factors and special dividends stripped out, underlying dividends rose by just 2.8%, the slowest increase since 2014. So, even before the COVID-19 outbreak, it was unlikely that 2020 would continue the record-breaking trend.

1Link Assets, 2019

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.