Bank dividends return but the hunt for income continues

BoE allows banks to restart shareholder distributions

clock • 4 min read

The return of bank dividends is a pivotal moment in the UK’s emergence from the financial impact of the coronavirus pandemic, but the country’s shareholder distributions are set to remain subdued for some time, forcing investors to maintain the search for alternative sources of income.

The Bank of England's financial stability report, published on Tuesday (13 July), confirmed that the "extraordinary guardrails on shareholder distributions are no longer necessary", citing the encouraging findings from recent stress testing, which found the banking sector is "resilient". However, the immediate end to the 16-month curb on dividend payouts will not see the UK return to pre-Covid highs, with dividends unlikely to return to pre-2020 levels until 2025. After payouts almost halved in 2020, total FTSE 100 payments excluding special dividends are expected to grow by 25% to £7...

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