Monday 26 July 2021 6:00 am | Updated: Sunday 25 July 2021 10:32 pm

Covid recovery pays dividends for UK plc

Just four companies left the junior market due to financial distress over the last year

UK plc has bounced back from the worst of the Covid crisis and is sharing the proceeds with investors, according to new figures released today.

Dividends distributed by UK companies surged 51.2 per cent annually to reach £25.7bn in the second quarter of this year, according to the latest UK Dividend Monitor from Link Group.

The sharp rise was mainly driven by companies restarting dividends as they repaired their balance sheets from the financial shock of the Covid crisis. 90 per cent of the year-on-year increase came from firms reinstating payments to shareholders.

Mining and banking led the way as the sectors with the greatest amount of capital distributed to shareholders.

Miners paid out £6.3bn in dividends in the second quarter of this year, mainly driven by Rio Tinto. Despite banks being under strict orders from the Prudential Regulation Authority not to revert dividends to pre-Covid levels, they distributed £3.4bn between them.

The PRA recently lifted restrictions on banks reinstating dividends to levels seen before the onset of the pandemic.

Baseline comparisons were also contributing factors prompting the rise. In the second quarter of 2020, three quarters of companies cancelled or cut dividends as they moved to insulate their finances from the pandemic.

Ian Stokes, managing director corporate markets UK and Europe at Link Group, said: “We have regularly cautioned over the last year that dividend patterns will be very noisy as we move through the recovery phase.”

“As normal life returns to Britain’s streets, so it is returning to business too. All the indicators of economic growth look very encouraging, and companies have come out of the crisis in most cases with their balance sheets looking strong.”