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The great dividend build-back

Clearly, 2021 is marked down as the year of the great revival; the year of the start of ‘build back better’, or whatever vacuous slogan is pinned to it. Whether or not it will be – and to what extent – remains unclear. No matter. Revival is the aim of the game and we can already see that reflected in the dividends companies are declaring.

Recall that through British eyes the pandemic only got going as the first quarter of 2020 drew to a close. The UK’s lockdown began on 23 March, 10 days or more after most of the rest of Europe. So UK company dividends for that quarter were not pulverised. The total pay-out from London’s quoted companies was £17.4bn, just 13 per cent less than 2019’s first quarter and exactly the same as 2018’s, according to data from investors’ services provider Link Group. Yet pay-outs in 2021’s first quarter – helped by some specials, particularly from Tesco (TSCO) – have beaten 2020’s figure by 8 per cent at £18.8bn.

True, the second and third quarters are a bigger test because they are always the six months of peak distribution. However, Link’s estimates are comparatively optimistic. Last year’s second quarter was when company bosses took a slash-and-burn approach to dividends. As a result, pay-outs for that quarter were 55 per cent lower than 2019’s. Yet that means this year’s second quarter has undemanding comparatives to beat and Link expects aggregate dividends to be 16 per cent higher than Q2 2020 at £19.8bn. The third quarter should see a similar pattern, with pay-outs 13 per cent higher at almost £21bn.

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