Pound slump hands UK shareholders a £5.7b dividend boost

STERLING’S slump is providing a windfall for UK investors in London-listed companies that pay dividends in dollars. 

The pound’s slide against the greenback will add £5.7 billion (S$9.28 billion) to UK dividends this year, according to a report from financial administration firm Link Group. It increased an estimate of 2022 payouts by 11 per cent to £97.4 billion, citing the currency impact. 

The report highlights the international makeup of the UK stock market, with about three quarters of FTSE 100 members’ revenue generated abroad. Sterling weakness is a boon for those companies, while mid-cap peers are suffering under a faltering domestic economy and the rising cost of imported components. 

The FTSE 100 is down 5 per cent this year, compared with the 24 per cent plunge in the FTSE 250. The pound has slipped 14 per cent against the dollar.

Meanwhile, the delisting of BHP Group prompted an 8.4 per cent decline in UK dividends to £31.4 billion in the third quarter, Link said. Excluding that effect, dividends were 1.0 per cent higher year-on-year. Payouts were “a touch weaker” than Link expected, due to softness in consumer staples and a drop in volatile mining dividends. BLOOMBERG