UK Edition
Dividends are forecast to fall in 2022 as companies cut back on special payouts.
Firms were able to treat shareholders last year when profits recovered following the pandemic. However Link Group, a data firm, expected £87.5bn to be paid to shareholders of British firms in 2022, 7pc less than the £94.1bn paid out last year. Total dividends peaked at £112.8bn in 2019.
A commodity price boom last year led to high profits at mining firms, who paid out around three times more to shareholders than their long-term average.
But beneath the surface the outlook is still bright for income seekers. Underlying dividend growth, which excludes special payments, is set to rise 5pc this year, reaching £81bn compared with payouts of £77.2bn in 2021. Over the next twelve months Link Group expects British stocks to yield 3.5pc.
Banks and oil companies will grow their payments the most this year, according to Link Group, as high oil and gas prices boost profits at energy firms and banks restore payouts that were frozen in 2020.
Many companies are pursuing multi-billion dollar share buyback programmes, including Shell, BP, and HSBC, in order to return additional surplus cash to shareholders, Link Group added.
Laura Foll, of fund manager Janus Henderson, said income from Shell would be the highlight for investors.
"Shell reset its quarterly dividend higher in mid-2021 and said it would grow dividends 4pc annually from this new level. This increase, along with the further dividend growth expected, could indicate that the energy sector will deliver for income investors in 2022," she said.
There could also be further dividend growth from banks as firms currently hold larger financial reserves than company management targets, Ms Foll added.
"This excess capital might be returned to shareholders via a mixture of dividends and share buybacks in 2022," she said.
Ian Stokes, of Link Group, said how well a company dealt with inflation would determine how much money it returned to shareholders.
“Price pressures are cropping up everywhere but some companies will be able to pass rising costs on to consumers in full, perhaps with a little extra on top, while others will see their margins squeezed.
“An extended period of rolling staff absence due to sickness will limit capacity too, crimping revenues, while the resulting supply shortages are making inflation worse. Big tax rises will also sap spending power in the economy,” he said.
AJ Bell, the stockbroker, expected Rio Tinto to be the biggest dividend payer, returning £5.8bn shareholders. It said Shell would give back £5.4bn and British American Tobacco £5.2bn.