UK dividends rise by 21% in Q1 – which sectors made the bumper payments?

UK dividends rose by more than a fifth in the first quarter to £16.4 billion kicking off a strong start to the year for income investors, despite short-term uncertainty caused by the conflict in the Middle East.

Higher-than-projected numbers were reported for both regular and one-off special dividends during the first three months of 2026, according to investment administration business Computershare’s latest dividend monitor report.

First-quarter payouts were at their highest level since 2021, largely due to sizeable one-off payments, although regular dividends were also ahead of projections – up by 1.1% on a constant currency basis, rising to £13.2 billion. Median company dividend growth was 2.8%.

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Mark Cleland, CEO issuer services, UK, Channel Islands, Ireland & Africa at Computershare, said the economic fallout from the Middle East conflict represents a significant shock but the implications for income investors remains to be seen.

He said: “The Middle East conflict is likely to place pressure on profits across a number of sectors, reducing the cash available for dividend payouts.”

Cleland explained it takes time for such pressure to present itself in dividends because they are only declared once company results are finalised and profits are reported.

He added companies tend to protect dividends in the short term by cutting buybacks or increasing borrowing, as dividend cuts send a negative signal to the market.

Special dividends dominated payouts in Q1

Investors received a ninefold increase in special dividends in Q1 compared with the same period last year, to £3.3 billion.

Consumer goods giant Reckitt Benckiser (LON:RKT) accounted for roughly half of that amount as it distributed the proceeds following the sale of Essential Home to a private equity buyer.

Similarly, telecommunications services business Zegona Communications (LON:ZEG) paid out £1.2 billion to shareholders following the disposal of its Spanish fibre network joint ventures.

Retailer Next (LON:NXT) was the third major special dividend payer, distributing £441 million following higher-than-expected sales, strong online performance and a land sale worth £54 million.

Computershare said beyond the contribution of extraordinary payments, a weaker pound also played a part in the numbers beating its projections, resulting in higher-value dollar payments.

What sectors paid the highest dividends?

At sector level, most categories performed better or in line with Computershare’s projections, with airlines, leisure and travel dominating, including cruise operator Carnival (LON:CCL), which paid its first dividend since the pandemic.

The two largest-paying sectors – healthcare and oil – reported 3% and 4% declines on last year’s Q1 numbers, respectively.

Both categories raised their per-share dividends in US dollar terms but as the pound weakened during the quarter, it held back the amounts actually returned to shareholders.

In spite of the geopolitical tensions and subsequent movements in the oil price, the outlook for the energy sector remains unclear.

In the oil and gas sector, low recent profits, small dividend increases and ongoing share buybacks all held back levels of cash returned to investors.

Such uncertainty can also lead to winners. Oil producers had seen lower profits as energy prices fell, leading to stagnating dividend growth and BP (LON:BP.) suspending its share buyback scheme to shore up its balance sheet. But now oil and gas prices are rising, energy producers will see their revenues rise faster than their costs in the near term.

Similar inflationary effects followed in food, beverages and tobacco.

Healthcare was the biggest distributor in the first quarter – contributing a quarter of Q1 total dividends. Pharmaceutical company AstraZeneca (LON:AZN) remained the top payer during the period for the fifth consecutive year but total payouts dipped due to those currency effects.

A broadly positive picture in housebuilding and consumer goods and services was hampered by Berkeley Group’s (LON:BKY) decision to cancel its dividend, citing tough trading conditions.

A stalwart for income seekers, utilities were a key positive contributor, in part due to companies like National Grid (LON:NG.) and SSE (LON:SSE) issuing “significant” numbers of new shares to fund major investments, increasing the size of their equity base.

The report said: “It might appear paradoxical to simultaneously raise new equity and pay a dividend but the point of continuing to remunerate shareholders is to signal confidence in the future.

“Utility investors are often very income-focused so maintaining the dividend is important to such companies.”

Both companies offered scrip dividends, where shareholders can choose to receive shares instead of cash, which helps companies manage cash levels.

Mid-caps, miners and banks all faring well for 2026

Elsewhere, the report also highlighted the higher growth rate of dividends from mid-sized companies compared to their larger counterparts.

Companies in the FTSE 250 index posted underlying dividend growth of 5.9% in the first quarter, far surpassing the 0.9% growth rate of the top 100 blue-chip names.

With UK equities projected to yield 3.5% over the next 12 months, up from 3.3% in January, the report said second quarter dividends were already shaping up favourably and ahead of Computershare’s January forecast.

It said miners were benefiting from rising commodity prices even before the war began, with payouts finally recovering after several weak years.

Banks are also pushing up their dividend increases beyond expectations.

As a result, Computershare is upgrading its forecast to £91.6 billion headline payments in 2026, including special dividends – an increase of 5.3% year on year. In January it had this predicted at 1.5%.

Underlying growth projections have also improved, expecting regular payouts of £86.7 billion – up 3.1% year on year, versus the earlier projection of 2%.

Cleland added: “Overall, 2026 dividends are currently tracking ahead of our January forecast after a solid first quarter and a positive outlook for Q2.

“Based on current information, the second half looks a little softer than initially expected, but not enough to offset a strong first half.”