EXTRAORDINARY dividends buoyed an otherwise stagnant year for UK payouts as headline dividends jumped 10.7 per cent to a record £110.6bn in 2019, according to data from Link Group.

The figure means that for every £20 invested in UK stocks in 2019, investors earned an average of £1. But the group highlighted that if special dividends were excluded, then underlying growth was 2.8 per cent — the slowest rate since 2014.

Link Group also warned that investors should expect to see declines in 2020, as erratic special dividends from miners and banks were unlikely to contribute as significantly in 2020.

Weaker sterling in the first three quarters of 2019 also helped to buoy the results because two-fifths of UK dividends are declared in US dollars. If exchange rate effects were removed, dividends actually fell in the second half of the year.

Michael Kempe, chief operating officer of Link Market Services, said: "The spice of huge special dividends and the zest of big exchange-rate gains enlivened what was in truth a rather bland year for UK dividends."

"2020 is not set for the same superficial excitement," he added.

Mining, banks and IT made up threequarters of the total payout, while telecoms contributed the least, falling more than a quarter year on year, largely due to a cut from Vodafone.

Rio Tinto and BHP led the mining dividends which have been the main fuel behind UK dividend growth in the last four years, with payouts having increased by six times since 2015/2016.

Link Group's first forecast for 2020 is for headline dividends to fall 7.1 per cent to 102.7bn, with underlying payouts — excluding special dividends — to fall 0.7 per cent to £97.9bn.

Kempe added: "With payouts from the UK's other biggest payers also unlikely to move very much and the big mining groups no longer providing the engine of dividend growth that drove [it] over the last three years, we do not expect significant increases from the top 100 either."

(c) 2020 City A.M., source Newspaper