Markets · · 2 min read
Editor: Bohdan S.
UK dividends jump 14% to £28.4bn as banks and miners pay out more
Third-quarter payouts hit their highest since 2019, but UK share yields now trail 10-year gilt yields by the widest margin since 2007.
The short answer
UK dividend payments rose 14.1% from a year earlier to £28.4 billion in the third quarter, the highest for that quarter since 2019, according to Computershare. The FT reported banks and miners led the rise. For income investors, the catch is that 10-year gilts now yield far more than UK shares.
What happened
UK companies paid out £28.4 billion in dividends in the third quarter, up 14.1% from a year earlier on a headline basis, according to Computershare's UK Dividend Monitor. That was the biggest third quarter since 2019. The Financial Times (FT) reported that banks and miners led the payouts. Mining dividends rose 89.6% and bank dividends 24.5%, and the two sectors together accounted for 85% of the growth. Rio Tinto paid the quarter's largest dividend, about £2 billion after a 44% increase. Glencore and Anglo American each more than tripled their payouts, and Barclays nearly doubled its interim dividend.
What it means
The headline number flatters the picture a little. Miners paid unusually little in the third quarter of last year, so this year's jump looks bigger than the underlying trend. Still, the typical company is doing better: the median dividend increase across all sectors was 5%, above recent norms, according to report author Mark Baker.
The two drivers are easy to trace. Miners are benefiting from higher prices for copper and precious metals, helped by the global data center building boom, Baker said. Banks are earning more because interest rates have stayed higher for longer and households are saving a lot, which gives lenders cheap deposits to work with.
Not everyone is sharing in it. Ad agency WPP cut its dividend by 69%, packaging group Mondi by 60%, and retailers struggled: Pets at Home cut its final dividend by 67.5%, B&M by 37%, and WHSmith stopped paying altogether. That echoes Computershare's warning in July that growth depends heavily on a few big companies and sectors. Back then, the top five payers alone made up 41% of second-quarter dividends, and Computershare said the domestic economy was the weak link for consumer-facing firms and housebuilders.
The most striking number is the yield gap. Rising share prices pushed the UK dividend yield down to 3.1% from 3.2% a year ago, while the 10-year gilt, a UK government bond, yields 5.4%. That is the widest gap in favor of bonds since 2007. Baker called this a more normal relationship, since dividends can grow over time while bond coupons stay fixed.
The bull case
Payouts are rising broadly, not just at a handful of giants, with the median increase above recent norms. Strong cash flow at miners and banks supports further dividend growth, and Computershare expects full-year payouts to rise 7.3% to £92.8 billion. A lower yield partly reflects rising share prices, which is good news for existing shareholders.
The bear case
Growth leans heavily on two cyclical sectors whose fortunes depend on commodity prices and interest rates, and both can turn. Cuts at WPP, Mondi and several retailers show pressure on companies tied to the domestic economy. With gilts yielding 5.4%, income investors can earn far more from government bonds, which could limit demand for dividend shares.
Why it matters
For investors
UK bank and mining shares, which dominate the FTSE 100's payouts, are most directly linked to these trends. The wide gap with gilt yields may weigh on dividend-focused funds if investors favor bonds for income.
The wider context
Even with this year's rise, Computershare's forecast for 2026 of £92.8 billion stays below the £100.5 billion peak of 2019, and about 31% lower after inflation. Savers relying on dividends have not fully caught up.
Market impact
| Asset (ticker) | Possible move | Timeframe | Why |
|---|---|---|---|
| iShares Core FTSE 100 UCITS ETF (ISF) | ↔ Unclear | Long term | Rising payouts support income, but higher gilt yields compete for the same investors. |
| Rio Tinto (RIO) | ↑ Up | Short term | Paid the quarter's largest dividend after a 44% increase, backed by metal prices. |
| Barclays (BARC) | ↑ Up | Short term | Nearly doubled its interim dividend as higher rates lift bank earnings. |
| UK 10-year gilt yield | ↔ Unclear | Short term | At 5.4%, it now beats the UK dividend yield by the widest gap since 2007. |
The FinPrism newsroom's view of how these figures could move, as of . It is general news commentary, not a recommendation to buy, sell or hold anything.
Frequently asked questions
Why did UK dividends rise so much this quarter?
Banks and miners drove most of the increase, accounting for 85% of growth, according to Computershare. Miners gained from higher copper and precious metal prices, while banks benefited from interest rates staying high. Weak mining payouts a year earlier also made the jump look bigger.
Which UK companies cut their dividends?
WPP cut its dividend by 69% and Mondi by 60%, according to Computershare. Retailers were also weak: Pets at Home cut its final dividend by 67.5%, B&M by 37%, and WHSmith suspended its payout entirely.
Are UK government bonds paying more than shares?
Yes. The 10-year gilt yields 5.4%, while the UK dividend yield is 3.1%, the widest gap since 2007, according to Computershare. Dividends can grow over time, however, while a bond's coupon stays fixed, which is why some analysts call this a normal relationship.
Sources: Financial Times, KuCoin News (Computershare UK Dividend Monitor), Portfolio Adviser
How this was made: written with AI assistance from the sources listed above, following our editorial standards.
