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The drop in UK dividends in the first quarter was offset by an increase in oil payouts.

On a headline basis, dividend payouts in the UK were £14.2 billion in the first quarter, down 24.9 percent year on year, but when one-off special dividends and the exit of mining giant BHP from the UK stock market are factored in, the adjusted underlying total jumps 12.2 percent to £13.3 billion.

According to Link Group's UK Dividend Monitor, headline dividends are expected to reach £92.2 billion this year, down 0.8 percent from last year. Underlying payouts, excluding specials, are expected to be £85.8 billion in 2022, up 15.2 percent from 2021.

The oil sector contributed the most to the increase in the first quarter, with a 29 percent increase. Following a sharp reduction in oil dividends during the pandemic when crude prices plummeted, oil majors are seeing a significant increase in cash flow as prices rebound.

This rise has sparked political debate in the UK, with Labour leader Keir Starmer promising to slap a windfall tax on profits on UK oil companies if he is elected Prime Minister.

In the first quarter, all sectors increased their underlying payouts. The return of BT's dividend after a two-year hiatus, and a post-Covid-19 rebound from the property sector were among the highlights. AstraZeneca, the most valuable company on the London Stock Exchange, showed its first increase in almost a decade.

Retailers showed signs of life as well, with large special dividends from Next and B&M European Value, and a special dividend from Royal Mail reflecting strong internet sales during the pandemic. However, dividends from the still-struggling travel and leisure industries were scarce.

"2022 started as strongly as we expected," Ian Stokes, Link Group's managing director for corporate markets in the UK and Europe, said. "We anticipate the rest of the year to surpass our expectations."

"There are risks to our forecast view of where dividends are heading, related to the constraint on consumer demand caused by energy price hikes here and around the world, and related to cost pressures that will weigh on margins for a number of sectors. Mid-cap companies are more likely to show any strain than the top 100."


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