Global dividend payouts hit a first-quarter record of $339.2 billion in the first three months of the year, according to the Janus Henderson Global Dividend index. UK dividend growth, however, was “relatively pedestrian”, says Andrew Jones of Janus Henderson.
Dividends rose 2.4% on an underlying basis to $15.3 billion. Ordinary (ie, not special, one-off payments) dividends are forecast to come in at £79.7 billion this year, still 6.5% below the all-time high of £85.2 billion paid out in 2018, says Russ Mould of AJ Bell.
Brexit, the pandemic and surging inflation have all taken their toll on UK plc. Instead, buybacks are growing in popularity. The FTSE 100’s forecast ordinary dividend yield is 3.8% this year, but that rises to 5.3% when you factor in buybacks already announced.
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
Buybacks are more flexible for boardrooms than dividends, notes James Gard for Morningstar. As Paul Schultz of the University of Notre Dame puts it, a dividend reflects “a company’s capital discipline, its respect for small investors, and its prudence”. But many British blue chips slashed payouts during Covid – there was a 44% drop in 2020 compared with 2019.
While understandable, trust in promises, once broken, can be difficult to restore. “Share buybacks are more prevalent in the UK than we’ve ever seen before,” Nick Shenton of Artemis Income tells Hargreaves Lansdown. Since the start of 2021, BP has reduced its share count by 17%; Barclays is down 14%.
A common argument for buybacks is that the shares are undervalued. True, “asking a company’s CEO whether their shares are undervalued is akin to enquiring of your local car dealer whether it’s time for an upgrade – you shouldn’t expect an unbiased opinion”. But with British shares trading at historically low levels, this time “we are inclined to agree with the CEO”.
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.
-
Three top-notch Taiwanese companies cashing in on the advent of AIOpinion Eric Chan, investment director and co-manager of the Aberdeen Asian Income Fund, highlights three potential Taiwanese winners in the technology industry
-
Weight-loss drugs could revolutionise the economy – the investments to buy nowThe new generation of weight-loss drugs are a boon for the overweight, but they also promise to change our relationship with food and revolutionise the economy
-
Find tomorrow’s Asian giants while they are still smaller companiesOpinion Nitin Bajaj, portfolio manager of the Fidelity Asian Values trust, picks three Asian companies to invest in.
-
AI will maintain Moody’s market lead, says Stephen ConnollyOpinion Veteran data provider Moody's has adapted well to the modern world, and is one of Warren Buffett’s longest-held investments
-
Is BlackRock World Mining gearing for a recovery?Opinion After a frustrating year, BlackRock World Mining is positioned for growth and to capitalise on the sector's recovery
-
Should you limit exposure to US tech stocks?An end to the AI boom would shake both US funds and global trackers. Here’s one way to trim exposure to US tech stocks
-
The mystery of America’s gold and why an audit mattersHow much gold does the US actually have? Dominic Frisby explains why it matters
-
Art vs AI: artists’ uprising takes on the botsAI performs impressively, but it’s all based on human work that was taken without payment. The government thinks this is fine. Copyright holders beg to differ
