Dividends to hit a record high: Shareholders to pocket £86bn in 2023

Dividend payments look set to hit a record high next year in a welcome boost to investors following turmoil on financial markets. 

According to a City report, payouts from FTSE 100 firms will total £85.8billion in 2023. This is an 8 per cent rise on the £79.1billion paid out to shareholders this year. 

The expected total for 2023 would be the highest on record and up from a Covid pandemic low of just £61.8billion. 

A rise in dividends, forecast in a report by AJ Bell, would be welcomed by savers who have money tied up in the stock markets through pensions and other investments. 

Dividends provide a crucial source of income to Britain’s biggest pension funds as well as individual savers who rely on the payouts, particularly in retirement. 

A rise in dividends after the carnage of the pandemic would be especially welcome at a time when double-digit inflation is hammering living standards. 

AJ Bell investment director Russ Mould said: ‘Analysts do expect 2023 to just set a new record high for FTSE 100 ordinary dividend payments, even if profit growth is expected to slow and then grind to a complete halt in 2024.’ 

Dividends dived during the coronavirus crisis to lows of £61.8billion in 2020 – the lowest point since 2013 – as the biggest payers such as BP and Shell cut or stopped payments altogether. 

The Bank of England imposed a temporary ban on shareholder payouts by major lenders during the pandemic, amid fears that bad loans could wipe out bank balance sheets. 

The central bank scrapped nearly £8billion worth of dividends due for the 2019 financial year and paused dividend payments throughout 2020. 

Even FTSE 100 heavyweights HSBC and Lloyds only restarted dividends in the first half of 2021. 

However, AJ Bell expects payments to bounce back in the next few years, to a whopping £90.9billion in 2024 which would top the pre-pandemic peak of £85.2billion, achieved in 2018. 

Oil and gas companies are expected to drive the rise. 

Shell is on course to be the single biggest dividend paying stock within the FTSE 100 in 2022, with Glencore, Rio Tinto and British American Tobacco close behind. 

The oil giant paid out a huge £6billion in dividends this year. 

Miner Glencore was close behind and increased its dividend by more than any other FTSE 100 company in 2022, boosting payments by over £3billion to £5.7billion in total. Analysts have nonetheless cautioned that miners’ dividends could be hit by falling demand for metals over the next few years. 

AJ Bell is expecting just ten stocks to pay dividends worth £42.8billion, or 54 per cent of the forecast total for 2022. The top 20 are expected to generate 72 per cent of the total index’s payout, at £57.3billion. 

Mould added: ‘Anyone who believes the UK stock market is attractive on a yield basis needs to have a good understanding of, and a strong view on, those 20 names in particular.’