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Our views 11 May 2022

Strong underlying dividend growth in Q1 leading to 2022 upgrades

5 min read

Headline dividend figures for the first quarter did not look great. Dividends declined by 25% to £14.2bn in the first quarter of 2022.

This, however, reflects significant distortions caused by the exceptional number of special dividends paid out last year, when we saw £6.2bn of special dividends, compared to £0.9bn this year, while BHP’s departure from the FTSE 100 also had an impact as this was historically a strong dividend payer.

However, if we look at dividends on an underlying basis – essentially stripping out these one-off effects, dividends rose 12% to £13.3bn on an underlying adjusted basis, with all sectors increasing pay-outs. It was little surprise that the biggest contributor to growth was the oil sector, which increased pay-outs by 29% (£505m).

To give an idea of how this has affected broker forecasts, Link Group has upgraded its 2022 headline UK market dividend forecast by £4.5bn to £92.2bn, driven by higher mining and oil pay-outs due to higher commodity and oil prices, as well as a faster-than-expected recovery in banking dividends. This represents a 1% decline compared to 2021. Excluding special dividends and adjusting for BHP’s exit, underlying pay-outs are expected to grow by 15.2% to £85.8bn in 2022, which equates to a market yield of 3.7% over the next 12 months.

Our UK equity income strategy uses a style-agnostic approach of investing in a broad range of companies offering strong cash generation, diversified by sector and lifecycle stage, as we believe that this can result in portfolios where performance should not be driven by macro or style factors, while being able to provide an above-market yield.


Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested. Portfolio characteristics and holdings are subject to change without notice. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.

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