UK dividends surged by more than a fifth in the first quarter of 2026, reaching £16.4 billion and marking the strongest start to a year for payouts since 2021, according to investment administration business Computershare’s latest dividend monitor report. The 21.1% jump, which came in well ahead of the company’s projections, provided a robust opening for income investors even as geopolitical tensions in the Middle East introduced fresh uncertainty.
Both regular and one-off special dividends outperformed Computershare’s expectations during the three months to March. Regular dividend payments rose by 1.1 per cent on a constant currency basis to £13.2 billion, while the median company dividend growth stood at 2.8 per cent.
Special dividends dominate
The headline figure was driven overwhelmingly by a ninefold increase in special dividends compared with the same period last year, which totalled £3.3 billion. Three companies accounted for the vast majority of those extraordinary payments.
Consumer goods giant Reckitt Benckiser distributed roughly half of the special dividend total, channelling the proceeds from the sale of its Essential Home division to a private equity buyer. Telecommunications business Zegona Communications paid out £1.2 billion to shareholders following the disposal of its Spanish fibre network joint ventures. Zegona declared a €1.4 billion special dividend, of which €975 million was used to settle Vodafone financing arrangements and €440 million was distributed to other shareholders. The payment was made on 7 January 2026.
Retailer Next was the third major contributor, distributing £441 million as a special dividend driven by higher-than-expected sales, a strong online performance and a land sale worth £54 million. Next had previously announced its intention to return surplus cash via a special dividend at the end of January 2026, estimated at around £3.10 per share.
Beyond the extraordinary payments, a weaker pound also played a part in the better-than-expected overall results, leading to higher-value dollar payments for UK shareholders.
Sector performance
At the sector level, most categories performed either better than or in line with Computershare’s projections. Airlines, leisure and travel dominated the picture, with cruise operator Carnival paying its first dividend since the pandemic.
Healthcare was the largest distributor of dividends in the first quarter, contributing a quarter of the total. Pharmaceutical giant AstraZeneca remained the top payer for the fifth consecutive year, although total payouts in the sector dipped by 3 per cent compared with last year’s first quarter. That decline was primarily due to currency effects: both healthcare and oil raised their per-share dividends in US dollar terms, but a weakening pound held back the amounts actually returned to shareholders. AstraZeneca’s second interim dividend for 2025 was announced on 10 February 2026, with payment on 23 March 2026. The company has said it intends to increase its annual dividend to $3.30 per share in the current financial year.
The oil and gas sector reported a 4 per cent decline year on year in Q1 payouts, despite rising per-share dividends in dollar terms. Low recent profits, small dividend increases and ongoing share buybacks all held back levels of cash returned to investors. However, with oil and gas prices now rising, energy producers are expected to see their revenues rise faster than their costs in the near term.
Utilities were a key positive contributor, in part because companies such as National Grid and SSE issued significant numbers of new shares to fund major investments, increasing the size of their equity base. Both companies offered scrip dividends, allowing shareholders to choose shares instead of cash, which helps manage cash levels. National Grid’s interim dividend for 2025/26 was payable on 13 January 2026; SSE had a dividend yield of 2.5 per cent as of February 2026.
Food, beverages and tobacco experienced similar inflationary effects to other sectors. A broadly positive picture in housebuilding and consumer goods and services was hampered by Berkeley Group’s decision to cancel its dividend, citing tough trading conditions. Berkeley Group has nonetheless been actively repurchasing shares for cancellation, with recent transactions on 29 April, 30 April and 16 April 2026.
Elsewhere, mid-sized companies showed notably stronger performance than their larger counterparts. FTSE 250 companies posted underlying dividend growth of 5.9 per cent in the first quarter, far surpassing the 0.9 per cent growth rate of the FTSE 100. Miners benefited from rising commodity prices, with dividends finally recovering after several weak years, and banks are also pushing up their dividend increases beyond expectations.
Outlook and forecasts
Based on the strong first-quarter figures and a positive start to the second quarter, Computershare has upgraded its full-year 2026 forecast for headline dividends to £91.6 billion – an increase of 5.3 per cent year on year, sharply higher than the 1.5 per cent growth it predicted in January. Underlying growth projections have also been revised upward, with regular payouts now expected to rise by 3.1 per cent year on year to £86.7 billion, compared with an earlier forecast of 2 per cent.
Mark Cleland, CEO issuer services, UK, Channel Islands, Ireland & Africa at Computershare, said: “Overall, 2026 dividends are currently tracking ahead of our January forecast after a solid first quarter and a positive outlook for Q2. Based on current information, the second half looks a little softer than initially expected, but not enough to offset a strong first half.”
Cleland noted that the Middle East conflict is likely to place pressure on profits across a number of sectors, reducing the cash available for dividend payouts. However, he explained that it takes time for such pressure to show up in dividends because they are only declared once company results are finalised. He added that companies tend to protect dividends in the short term by cutting buybacks or increasing borrowing, since dividend cuts send a negative signal to the market. The OECD has warned that the conflict will damage the UK’s economy more than any other industrialised nation, forecasting 0.7 per cent growth for 2026 and higher inflation due to rising oil and gas prices. The rise in energy prices is expected to push petrol and household gas bills higher, and financial markets no longer expect interest rate cuts in 2026.
With UK equities projected to yield 3.5 per cent over the next 12 months, up from 3.3 per cent in January, investors are adjusting portfolios in response to the geopolitical climate, showing increased interest in energy, technology, AI, defence and gold, while reducing exposure to airlines, luxury stocks, and oil. Berkeley Group, which cancelled its dividend, has been actively repurchasing shares for cancellation in a move that can enhance earnings per share and signal confidence in the company’s valuation.
