Dividends from UK-listed firms up 16.5% in 2022, far outstripping pay rises

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The regular dividends that investors receive from owning shares in UK-listed companies soared by 16.5% in 2022, far outstripping wage growth in either the private or public sector.

Investors’ returns from underlying dividends – excluding volatile one-off payouts – reached £84.8bn during the year, partly owing to a £3.8bn boost from the weakness of the pound, which inflated the figures for dividends paid in dollars.

The rise in share income was particularly steep for those who invest in banks and oil companies, which were boosted by the high oil and gas prices that have contributed to the cost of living crisis.

Including the value of one-off dividends, which companies make from time to time to reward investors above and beyond their regular annual payouts, the total value was still up, albeit by a more modest 8% to £94.3bn.

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The increase in shareholder rewards, both including and excluding one-offs, far outstripped wage growth.

Wage rises are averaging 3.3% in the public sector, according to the latest figures from the Office for National Statistics for March to November. Private sector earnings were up 7.2% during the same period and the national average was 6.4%.

The UK’s annual inflation rate hit a 41-year-high of 11.1% in October 2022, and remains at 10.5%, with soaring energy costs a big factor during the past year.

That means that costs are rising faster than salaries, although not faster than dividends, according to the latest figures from the Link Group, which cover the FTSE All Share index of about 600 companies, excluding investment trusts.

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Link Group said “resurgent” banking dividends were the most significant driver, accounting for a quarter of the rise. Soaring energy prices, which have saddled households with sky-high bills, pushed oil payouts higher by a fifth.

Oil companies also implemented share buybacks, which can strengthen the share price as another way of rewarding investors, with Shell alone repurchasing £16bn of its own stock.

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Ian Stokes, Link Group’s managing director of corporate markets in the UK, said: “The economic skies are decidedly gloomier both in the UK and around the world than this time last year.

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“Company margins in most sectors are already under pressure from higher inflation and squeezed household budgets. Soaring interest rates are now crimping profits by raising debt-service costs too. This will leave less money for dividends and share buybacks in many sectors.

“Despite these pressures, Link Group expects dividend income to grow in 2023, albeit far slower, at 1.7% on an underlying basis.”

He added: “Even with lower mining payouts, there is good growth coming through from the banks and oil producers and across the wider market, cuts made during the pandemic mean payout ratios are conservative on the whole.

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“Companies would also rather reduce share buybacks than cut dividends as cutting dividends is a very negative signal to give to the market.”

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