Although dividends in the UK increased in the last quarter of 2025, investor payouts were reduced by share buybacks

Amidst rising share buybacks, dividend growth last year continued to lag behind pre-pandemic averages

In the last quarter of 2025, payouts to investors in UK dividend stocks totaled 14.3 billion, an increase of 1.3 percent over the previous quarter.

According to new data from the Computershares dividend monitor report, regular dividends, which do not include one-time extraordinary payments, increased to 13.9 billion in Q4 2025, indicating a successful year-end.

Because regular dividends were more resilient than anticipated, particularly in the energy, consumer basics, and real estate sectors, the fourth quarter of 2025 exceeded Computershares projections.

The quarter's results, which came in 360 million more than anticipated, were boosted by an increase in special dividends. Additionally, dividends paid in US dollars were more favorably converted into pounds in October and November due to the weaker pound.

UK dividends decreased overall in 2025 by 0.9 percent to 87.5 billion, despite a strong Q4. This resulted in a median annual dividend growth rate of 3.7 percent, down from 4.6 percent in 2024. Nevertheless, the full-year numbers for 2025 exceeded Computershare's estimate of 87.2 billion.

Additionally, dividend growth in 2025 was only marginally faster than inflation and significantly slower than pre-pandemic average rates.

Mark Cleland, CEO of issuer services in the UK at Computershare, said: "Dividend payouts have still not regained pre-pandemic highs, and the slow dividend growth weve seen since 2020 largely continued last year.

"As 2025 went on, rates did improve and may have been higher despite the fact that many businesses invested large sums of money in share buyback initiatives.

Buybacks of shares continue to reduce dividend growth.

The recent trend of investors witnessing slower dividend growth as companies shifted funds to share buybacks was maintained last year.

Computershare estimates that companies spent about 63.6 billion through share buyback schemes in 2025, more than twice as much as they spent in 2019, though complete numbers won't be available until March.

Compared to just 30p in 2019, buybacks were worth 73p for every 1 in dividends in 2025.

According to Computershare, since 2019, the frequency of buyback schemes has decreased annual dividend growth by an average of three percentage points.

Investors would have received 120 billion in 2025 instead of the pitiful 87.5 billion if the money used for share buybacks had instead been paid out as dividends.

Which industries had the biggest dividend growth?

By far the strongest sector for dividend growth in 2025 was the industrial goods and support sector. Underlying dividends growth in the sector was up 23.9 percent on the year.

This was primarily caused by Rolls-Royce paying out a record 890 million to its shareholders following a four-year hiatus.

A robust year in the aerospace and defense markets contributed to a significant increase in BAE Systems' dividend payments, which in turn boosted the sector's dividend growth.

In the meantime, regular dividends were raised by £1.2 billion by banks, insurers, and general financials.

Basic consumer goods, utilities, and healthcare all significantly improved things. Dividends in the consumer and homebuilding sectors decreased, with Bellway, a home builder, and Burberry, a designer brand, paying out significantly less.

Will 2026 be a good year for dividend investors?

This year is projected to see investors paid total dividends of around 88.8 billion, up 1.5 percent on a headline basis, according to forecasts by Computershare.

Regular dividends of 85.9 billion are anticipated to rise 2.0 percent on a constant-currency basis, with UK equities yielding 3.3 percent.

Computershare projects that dividends from the mining sector are likely to slow in 2026 or potentially even stop altogether. While energy dividends are anticipated to remain flat, banks are anticipated to continue producing modest growth.

The negative impact of share buybacks on dividend growth is also expected to continue in 2026.

Cleland continued, "A median dividend growth of 3.7 percent indicates a healthier market trend than the outlying figures suggest, but there are no clear indications that dividends will grow much faster in 2026." The "