UK dividends rose in final quarter of 2025, but share buybacks ate into investor payouts

Investors in UK dividend stocks got £14.3 billion in payouts in the final quarter of 2025, a rise of 1.3% on the previous quarter.

Regular dividends, which excludes one-off extraordinary payments, rose to £13.9 billion in Q4 2025, marking a positive end to the year, new data from Computershare’s dividend monitor report shows.

The fourth quarter of 2025 beat Computershare’s projections as regular dividends were more resilient than expected, especially in the energy, consumer basics and property sectors.

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Meanwhile, a surge in special dividends helped boost the quarter’s figures, coming in £360 million higher than expected. A weaker pound in October and November also meant dividends paid in US dollars were converted into pounds more favourably.

Despite a strong Q4, UK dividends fell overall in 2025 by 0.9% to £87.5 billion, bringing the median annual dividend growth rate to 3.7%, down from 4.6% from 2024. This being said, 2025’s full year figures were better than Computershare's prediction of £87.2 billion.

Dividend growth in 2025 was also much slower than average rates before the pandemic, only just beating inflation.

Mark Cleland, CEO of issuer services in the UK at Computershare, said: “Dividend payouts have still not regained pre-pandemic highs, and the slow dividend growth we’ve seen since 2020 largely continued last year.

“Rates did improve as 2025 progressed – and might well have been higher although many companies used significant sums of capital to undertake share buyback programmes.”

Share buybacks continue to eat into dividend growth

Last year continued the recent trend of investors seeing slower dividend growth as firms instead diverted cash into share buybacks.

While full figures will not be available until March, Computershare estimates that firms spent around £63.6 billion through share buyback schemes 2025, more than double the total spent in 2019.

Buybacks in 2025 were worth 73p for every £1 in dividends, compared to just 30p in 2019.

The prevalence of buyback schemes has reduced annual dividend growth by three percentage points on average since 2019, says Computershare.

If the cash used for share buybacks had paid out as dividends instead, 2025 would have seen £120 billion distributed among investors instead of the comparatively paltry £87.5 billion.

Which sectors saw the strongest dividend growth?

By far the strongest sector for dividend growth in 2025 was the industrial goods and support sector. Underlying dividends growth in the sector was up 23.9% on the year.

This was thanks mainly to Rolls-Royce making record payouts to its shareholders of £890 million after a four year absence.

A large increase in dividends paid by BAE systems also helped push up the sector’s dividend growth thanks to a strong year in the aerospace and defence markets.

Meanwhile, banks, insurers and general financials increased regular dividends by £1.2 billion across the three sectors.

Healthcare, utilities and basic consumer goods also made a notable positive contribution. The homebuilding and consumer sectors saw reduced dividends, with notably less paid out by house builder Bellway and designer brand Burberry.

Will 2026 be a good year for dividend investors?

This year is projected to see investors paid total dividends of around £88.8 billion, up 1.5% on a headline basis, according to forecasts by Computershare.

Regular dividends of £85.9 billion are anticipated to rise 2.0% on a constant-currency basis, with UK equities yielding 3.3%.

Computershare projects that dividends from the mining sector are likely to slow in 2026 or potentially even stop altogether. Banks are also expected to continue delivering modest growth, while energy dividends are expected to be flat.

The negative impact of share buybacks on dividend growth is also expected to continue in 2026.

Cleland added: “There are no clear indications that dividends will grow much faster in 2026, but a median dividend growth of 3.7% suggests a healthier market trend than the outlying figures suggest.”