The sector that cut dividends 40% last year

This sector had been a generous dividend payer over the past couple of years. Sam Benstead explains why its payouts have fallen sharply.

28th January 2025 09:41

Sam Benstead from interactive investor

UK mining companies reduced their 2024 dividend payouts by £4.5 billion, taking the total to £7 billion last year.

This 40% decline was exacerbated by huge payouts between 2021 and 2023, where the sector was the biggest provider of dividends.

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The MSCI ACWI Metals and Mining index dropped 12.8% in 2024, as mining company share prices fell. The largest companies in the index are BHP Group. Rio Tinto and Freeport McMoRan.

Despite falling share prices, commodity prices rose modestly last year. The Invesco Bloomberg Commodity UCITS ETF rose around 7% in 2024.

But mining stocks still offer attractive yields. For example, investment trust BlackRock World Mining shares yield 7% based on the last 12 months of dividends. The yield has stayed high due to a falling share price.

Despite the drop in mining payouts, Computershare’s latest dividend report found that UK companies paid their shareholders £92.1 billion in 2024 — 2.3% more on a headline basis than in 2023.

The headline growth rate was supported by higher special dividends, but the underlying total, which excludes these one-offs, fell 0.4% on a constant-currency basis to £86.5 billion.

The only other sector outside mining to see a significant reduction was housebuilding, which was particularly affected by cuts from Persimmon and Bellway, which have suffered from the slow housing market.

Banks, insurance companies and food retailers were among the sectors to make the strongest positive contributions. Overall, 17 out of 21 sectors and 77% of companies saw dividends rise or hold steady year on year.

In 2025, Computershare expects payouts to reach £92.7 billion at the headline level — up just 0.7% year on year — with the underlying total (which excludes special dividends) set to rise to £88.2 billion, up 1%.

The data group noted that sharply rising borrowing costs will affect government finances, economic growth, business investment, profit margins and consumer spending.

These higher market interest rates will likely have an impact on the ability of companies to generate cash for shareholders, it argues.

Mark Cleland, of Computershare, said: “It is worth highlighting that dividend growth was better outside the highly cyclical mining sector. In addition, share buybacks are having an impact, diverting an estimated £42-£45 billion of cash in 2024 to shareholders that might previously have been paid mostly in dividends.”

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Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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