While it may have been choppy seas for growth investors last year, for those with an income strategy it was plainer sailing with regular dividend payments for the FTSE All-Share excluding investment trusts growing by more than 5% to over £88 billion according to the latest Dividend Monitor report from financial services company Computershare.

The firm’s latest quarterly report reveals some interesting trends, with underlying dividend growth accelerating in the final quarter which hopefully bodes well for 2024 payouts.

The main drivers of growth were the banks, in particular HSBC (HSBA), which fully restored its quarterly payment for the first time since the pandemic and as a result regained its position as the number one dividend payer in the UK, a spot it last held in 2008 says the report.

Thanks to HSBC, the banks not only made the biggest contribution to dividend growth for the second year running, with payments up by nearly a third to £13.8 billion, they also became the largest-paying sector for the first time since the great financial crisis let alone since the pandemic.

 Computershare’s chief executive of issuer services Mark Cleland said: ‘The need to quell inflation with higher interest rates means the last two years have delivered a dramatic turnaround. Bank investors are reaping the dividends of this reversal and we expect them to see even larger payouts in 2024.’

Oil and gas and utility stocks were also major contributors, with high energy prices driving a 15.8% increase in payouts from energy stocks and inflation-linked dividend policies boosting utility payouts to a record level.

However, the mining sector let the side down with payments shrinking over 28% to just £4.5 billion due to weak commodity prices.

The survey also revealed that although underlying dividends grew by 5.4%, the overall dividend ‘pot’ shrank by 3.7% to £90.5 billion due to fewer one-off special dividends.

With major companies such as Aviva (AV.), BP (BP.), Glencore (GLEN) and Shell (SHEL) buying back shares, reducing the number in circulation, the total value of dividends paid rose more slowly than it would have.

According to Computershare, without buybacks dividend growth last year would have been 7.2% instead of 5.4%. 

For 2024, the firm is expecting underlying dividend growth of 2% to £89.8 billion and total headline growth of 3.7% to £93.9 billion helped by an increase in special dividends.

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