There has never been a better time to be an income investor in UK equities, as payouts for the period from April to June hit an all-time quarterly record of £36.7 billion according to the latest Dividend Monitor from Computershare.

Most of the increase was thanks to one-off special dividends, leaving the underlying growth rate at just 1%, but for those clipping the coupons or reinvesting the income to buy more shares it doesn’t matter where the cash has come from.

‘Higher profits mean most sectors are paying more in dividends and spending a lot of cash on share buybacks, but fortunes diverge widely between companies and sectors, and international factors are at play, and this impacts the dividend picture too,’ observes Mark Cleland, head of governance services at Computershare

Large special dividends meant the FTSE 100 saw strong headline growth of 10.2% while the FTSE 250 saw even stronger growth of 12.3% during the quarter, with 16 out of 21 sectors lifting their payouts.

Alongside better-than-expected growth in earnings, several companies which sold off parts of their business paid out the proceeds of the asset sales in the form of large one-off special dividends.

Banks made the strongest contribution to growth thanks to higher net interest margins and are on track for record payouts this year, while healthcare made the second-largest contribution courtesy of strong earnings growth at GSK (GSK) and Haleon (HLN).

At the other end of the spectrum, mining payouts were down sharply which is the reason for the low underlying growth figure – excluding miners, the underlying growth would have been 8.6% which is respectable.

Housebuilders were also a weak point, with dividends down more than a third as they cut back their targets for home completions due to the high interest rate environment and weak buyer confidence.

Special dividends reached £4.1 billion in the second quarter, more than the total of the previous six quarters combined, and HSBC’s (HSBA) £3.1 billion payout – as it distributed the proceeds of the sale of its Canadian business – was the fourth-largest special dividend in more than 17 years.

Events and advisory-services firm Ascential (ASCL) paid out £450 million from the sale of two subsidiaries, while Pinewood Technologies (PINE), the motoring software division of Pendragon, handed back £358 million, with insurer Admiral (ADM) and homewares retailer Dunelm (DNLM) making up most of the remainder. 

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