Interactive Investor

Three UK banks about to pay shareholders over £6bn

Higher interest rates have given high street lenders the ammunition to returns billions of pounds in profit to investors. This trio get the ball rolling, including one of the biggest dividends around.

27th March 2024 13:52

by Graeme Evans from interactive investor

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The income power of Britain’s big banks will be felt by investors next month when HSBC Holdings (LSE:HSBA), NatWest Group (LSE:NWG) and Barclays (LSE:BARC) pay over half April’s £10.5 billion in FTSE 100 dividends.

The industry contributed a large chunk of the world’s dividend growth in 2023 as the higher interest rate environment enabled many lenders to increase their margins.

Big payers include HSBC, which is due to distribute about £4.66 billion on 25 April having declared its biggest annual dividend since the financial crisis in 2008.

In total across 2023, the Asia-focused lender has returned $19 billion (£15 billion) to shareholders by way of dividend and buybacks. At 7.7%, it is also the highest yielding of the eight blue-chip stocks due to pay dividends in the coming month.

The bank’s April dividend of 31 US cents (24.54p) a share is up from 23 cents the year before, bringing the total for 2023 to 61 cents (48.34p) after quarterly payments of 10 cents landed in accounts in June, September and December.

Shareholders can also look forward to a special dividend of 21 cents (16.64p) a share following the sale of HSBC’s banking business in Canada in the first half of 2024.

Barclays will kick off the industry’s dividend spree on Wednesday when it distributes a dividend of 5.3p a share worth £801 million. This compares with 5p a share the year before.

The bank has returned about £7.7 billion, or 35% of its market cap to shareholders since 2021 and intends to grow this to at least £10 billion over the three years to 2026.

In a recent strategy presentation, chief executive C.S.Venkatakrishnan said 2024’s dividend was likely to be similar to 2023’s level before progressive increases as a result of share count reduction caused by buybacks.

NatWest is due to distribute just over £1 billion to shareholders on 29 April via a dividend of 11.5p, up from 10p the year before and part of a 26% increase in 2023’s ordinary dividends to 17p a share.

Returns in the three years from 2021 amount to £12.5 billion, with investors and the government picking up £5.8 billion over that period and the rest from buybacks.

The banking sector distributions, which continue in May when Lloyds Banking Group (LSE:LLOY) and Standard Chartered (LSE:STAN) pay shareholders, has offset pressure in the mining sector.

Source: interactive investor, SharePad. Data and exchange rate conversions (*) correct at 26 March 2024.

Rio Tinto Registered Shares (LSE:RIO) awarded the highest dividend of any London-listed stock in 2021 and 2022, when mining industry shareholders benefited from the surge in commodity prices.

Its latest of 203.77p a share is due to be paid on 18 April, an increase on the previous year’s 185.35p, but not enough to prevent a 12% fall in the total for 2023 as the miner distributes 60% of earnings for an eighth year in a row.

The company, whose plc ownership base includes about 18,000 small shareholders, trades with a yield of 6.8%. Its distribution of £2.55 billion is the second-largest of the month behind HSBC.

GSK (LSE:GSK) is distributing £649 million on 11 April, having increased its fourth-quarter distribution to 16p a share from 13.75p the year before. The total across 2023 is 3.25p lower at 58p but the drugs company has said it expects 2024’s figure to be 60p.

Among other high-profile dividend payers, drinks giant Diageo (LSE:DGE) is due to hand shareholders about £715 million on 17 April.

The company no longer declares its dividend in sterling, having recently switched to US dollars to reflect the currency under which it generates an increasing level of sales and expenses.

The pound value of the dividend will be announced about two weeks prior to the payment date, with the company’s 5% higher interim award of 40.5 US cents likely to be about 32.06p.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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