London dividend payouts slow as mining gravy train runs out of steam

London investors were left short-changed in the second quarter of the year as miners reined in dividends after years of blockbuster payouts, according to new research.

Firms like Glencore and Rio Tinto have formed the bulk of payouts in the City in recent years as swinging commodity prices pushed up profits in the sector.

However, overall dividends across London grew just 0.7 per cent to $36.7bn (£28bn) between April and June as miners felt the squeeze of falling profits and weakening demand from China, according to analysis from Janus Henderson.

The figure dragged London well below a global dividend growth rate of 8.2 per cent. Investors around the world pocketed a record $606.1bn (£462.7m) in the same period as European payouts and new rewards from tech giants Alphabet and Meta pushed up the headline figure.

Dividends on the rise outside of mining sector

“The slow UK growth rate reflects cuts in the mining sector, specifically from Glencore, where the impact of its rebased dividend policy has an impact,” analysts at Janus Henderson said.

“Excluding the mining sector, however, underlying growth was 8.6 percentage points higher year-on-year, showing just how significant the impact of that one sector has been.”

Andrew Jones, portfolio manager on Janus Henderson’s UK Responsible Income Fund, added it was “encouraging” to see the underlying growth rate of the UK market improve after mining firms were stripped out.

Analysis from UBS at the beginning of the year suggested that total payouts from London’s miners would fall to around £6.2bn at the half year mark, down from December’s £6.8bn.

It marks a sharp fall from 2022’s peak for dividend distributions, when miners accounted for £1 in every £6 declared by UK listed companies.

Uncertainty in demand for iron ore from China’s steel industry and one-off corporate factors have weighed on the sector during the first half of the year, analysts at Interactive Investor said over the summer.

Excluding the UK, European investors bagged $204.6bn (£156.2m) in an all-time record for the region.

More than half the growth came from banks, which have reaped the benefits of higher interest rates. 

France, Italy, Switzerland and Spain all saw record dividends. In Germany, payouts fell 1.2 per cent year-on-year, caused by a large cut by pharmaceutical company Bayer.

Dividends in the US jumped 8.6 per cent, with first-time payers Meta and Alphabet contributing 3.6 per cent of the total.