Underlying dividend growth slows

The FTSE 100 Index fell and its yield rose during October as Brexit uncertainty continued. Although the UK managed to negotiate a fresh Withdrawal Agreement, Prime Minister Boris Johnson was unable to secure MPs’ backing for his timetable. As a result, the Brexit deadline was extended once again – this time to 31 January 2020.

  • A General Election was called for 12 December
  • Special dividends and currency continued to flatter headline dividend growth
  • Dividend payouts from the telecoms and general retailers sectors fell in Q3

To view the series of market updates through October, click here


The FTSE 100 Index fell and its yield rose during October as Brexit uncertainty continued. Although the UK managed to negotiate a fresh Withdrawal Agreement with Brussels, Prime Minister Boris Johnson was unable to secure MPs’ backing for his timetable. As a result, the Brexit deadline was extended once again – this time to 31 January 2020 – and a General Election was called for 12 December.

“Special dividends are helping to conceal a slowdown in dividend growth”

The FTSE 100 Index fell by 2.2% during October, while the FTSE 250 Index rose by 0.4%. Over the month, the yield on the FTSE 100 Index rose from 4.42% to 4.53%, while the FTSE 250 Index’s yield declined from 3.25% to 3.17%. In comparison, the yield on the benchmark UK government bond increased from 0.39% to 0.57%. Oil company BP reported a third-quarter loss as hurricanes and lower oil and gas prices took effect; the company has decided to suspend its scrip dividend option for the third quarter.

Since the beginning of 2019, the best-performing FTSE industry sectors include technology hardware & equipment, leisure goods, construction & materials, and financial services. At the other end of the performance spectrum, the worst-performing sectors include automobiles & parts, oil equipment & services, industrial metals & mining, and fixed-line telecommunications.

Special dividends are helping to conceal a slowdown in dividend growth, according to Link Asset Services’ Dividend Monitor for the third quarter of 2019. During the period, UK dividends posted headline growth of 6.9%, reaching a total of £35.5 billion. Nevertheless, this growth was flattered by “exceptionally large special dividends”; on an underlying basis, dividends actually fell by 0.2% over the quarter, with a total payout of £32.2 billion. The weak pound also had a substantial impact on the bottom line: on a constant currency basis, total dividends fell by 3% during the third quarter, posting their worst quarterly performance for three years. Link commented: “2019 will almost certainly prove a temporary high-water mark for UK dividends”.

Dividends paid by banks rose by 40% during the third quarter, while dividends from the mining sector increased by almost one-third, boosted by special dividends from Rio Tinto and BHP. Within the telecommunications sector, however, dividend payouts fell by 40%, led by Vodafone’s sizeable dividend cut. Elsewhere, payments from the general retailing sector also dropped following cuts from M&S, Dixons Carphone, and Superdry.


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