- LSE dividends hit new record in Q2
- Hesitant investors buy back in to local shares in June
The FTSE 100 is often considered an old-fashioned index, dominated by low-growth companies. But what banks, miners and energy stocks have over the US tech giants is dividends. Payouts to investors hit a new record in the three months to 30 June, according to Computershare’s latest dividends report.
London-listed companies paid out £36.7bn in the second quarter, up 11 per cent on last year. This was helped by HSBC (HSBA) paying a special dividend of 21¢ (16.3p) after the sale of its Canadian business, and banks overall were more generous as higher interest rates drove earnings up. Boards have avoided committing to long-term higher payouts, however, with underlying dividend levels up just 1 per cent on a year ago.
Computershare trimmed its forecast for 2024 payouts overall, limiting full-year growth to just over 5 per cent because of the drop-off in mining dividends. In recent years Glencore (GLEN) has pushed returns way up because of high coal prices, but the mining and trading giant cut its dividends because of the Teck Resources (US:TECK) coal division buyout.
“Higher profits mean most sectors are paying more in dividends and spending a lot of cash on share buybacks, although this might not be obvious given that the gravitational pull of mining companies on UK dividends is hard to escape,” said Mark Cleland from Computershare.
Alongside higher payout levels, investors are also showing more interest in the local market, at least month-on-month.
June saw net inflows into UK listed stocks surge by 836 per cent on the platform Interactive Investor. Marking a 37 per cent increase in net inflows from Q1 2024 to Q2 2024. However, net buying is still 70 per cent down on the first half of 2023.
Myron Jobson, a senior personal finance analyst at Interactive Investor, attributed the increase to “an improving economy, a revival of M&A activity and a fall in inflation.”
The recent arrival of a Labour government could also have improved confidence, Jobson argued, as private investors may be “betting on a positive outcome for UK plc following the general election, with the newly elected government promising to implement a number of measures to stabilise the UK economy and boost investment to domestic stocks”.
The Interactive Investor report showed UK buyers were keenest on gilts, Legal & General (LGEN) and AI favourite Nvidia (US:NVDA) in June, although 27 per cent of the trades in the latter were investors taking profits.
