Improved prospects for income investors
Income investors are raking in dividends, but it's not from the FTSE 100

British investors love their dividend payments, but the best payout growth of late hasn’t come from the FTSE 100, says Julian Hofmann in the Investors’ Chronicle. Data from Octopus Investments shows that total cash dividends paid by FTSE 100 companies are still almost 12% below 2019 levels (Covid triggered large cuts in UK dividends in 2020).
By contrast, ex-FTSE 100 firms are on course to pay out 9.2% more than pre-Covid levels. Aim is “the standout performer”, notching up an almost 45% payout rise. Income investors often perceive the FTSE 100 as more dependable than small caps, but the top-10 FTSE payers account for 56% of total dividends, leaving income reliant on the fortunes of a small cluster of firms.
Payouts are at least on a firmer footing than in the past, says Russ Mould of AJ Bell. Between 2014 and 2020, FTSE 100 earnings cover (profit divided by dividend payouts) “never once covered payouts by a factor of two or more”. Cover now stands at 2.07. FTSE 100 dividends are forecast to reach an aggregate £78.6 billion this year and £83.9 billion in 2025, still short of 2018’s record of £85.2 billion.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
FTSE 100 firms have also announced £49.9 billion in share buybacks this year, close to last year’s level. Globally, dividend payouts hit a record $606.1 billion in the second quarter, according to the Janus Henderson Global Dividend index. Banks have been enjoying “strong margins and limited credit impairments”, enabling them to pay generous dividends, says Jane Shoemake of Janus Henderson.
Tech firms and dividends
Meanwhile, technology firms are increasingly shifting from growth to income mode, with Meta, Alphabet and Alibaba the new kids on the dividend block. For income investors, that is “a really positive signal that will boost global dividend growth by 1.1% this year".
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
-
Will Comstock crash – or soar?
Opinion The upside for Comstock, a solar panel-recycling and biomass-refining group, dwarfs the downside, says Dominic Frisby.
-
Can new management turn RIT Capital around?
After several years of poor performance, there is growing evidence that RIT has turned the corner, says Max King
-
Out of America's shadow: Why Trump's tariff chaos may be good for non-US stocks
Opinion Upending global investment and trade could benefit other countries at the expense of the US market, says Cris Sholto Heaton
-
Will Trump force the Fed to lower interest rates?
Opinion Markets are ignoring the risk that Donald Trump forces the central bank into reckless interest rate cuts
-
Large cap stocks start to struggle – is it time for investors to reassess their focus?
Buying quality large caps worked very well last decade. A more volatile world will be a bigger challenge for these star stocks, says Cris Sholto Heaton
-
How to find the best investment ideas that others will miss
Find the best investment ideas by observing trends and listening to anecdotes, says Max King
-
Has RIT Capital fallen out of favour?
RIT Capital saw its discount soar amid weak returns, and investors remain sceptical of a turnaround
-
Why emerging markets are waiting for a weak dollar
Emerging markets have had a better year but, like everything else, are still lagging far behind the US
-
Invest in sports: how to profit from the booming global industry
Whether it’s backing sports teams, the media networks that buy the rights or the firms that make the clobber, opportunities abound for investors
-
Should you bet on US stocks?
You don’t have to be bearish on US stocks to worry that they are now such a large share of global indices