Dividends distributed by UK companies dropped by 4.6% to £14.0 billion during the first quarter of 2025, according to Computershare’s latest Dividend Monitor.
The headline decrease primarily reflects the reduction of one-off special dividends, which accounted for 3.3 percentage points of the overall decline.
Regular dividends totalled £13.6 billion, representing a very marginal 0.2% year-on-year decrease when excluding special dividends and adjusting for currency fluctuations.
While there was an overall decline in UK company dividends, the reduction was concentrated among a small number of companies. Significant dividend cuts from three major companies – Vodafone, Burberry, and Bellway Homes – collectively reduced the total by five percentage points.
The pharmaceutical sector was the quarter’s strongest performer in terms of dividend growth, with companies like AstraZeneca and GSK making the strongest positive contributions.
“Although the headline dividend growth looks disappointing this was mainly due to lower one-off special dividends. These can be volatile and investors shouldn’t be too concerned given they are more discretionary than ordinary dividends,” said David Smith, Portfolio Manager at Henderson High Income Trust.
“Certainly given the uncertain economic outlook caused by President Trump’s trade policies we would expect companies to take a more conservative approach and pare back special dividends and share buybacks to preserve cash flows.
“However, it’s important to remember that UK companies are in a healthy position with strong balance sheets while ordinary dividends are well covered by profits, much more so than at the start of the Covid pandemic.
“Hence we believe ordinary dividends will be resilient going forward on an underlying basis and we are encouraged by the 3.3% dividend growth seen from the median company in the UK, which is more in line with our expectations on underlying dividend growth this year.”