UK bank dividends boost full-year outlook for income seekers

Some sectors have done so well they’ve been able to afford massive increases in shareholder payouts. City writer Graeme Evans has the details.

23rd October 2026 10:30

by Graeme Evans from interactive investor

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Barclays’ headquarters this week in New York City. Photo: KHemaz/GVN via Getty Images.

The UK’s dividend recovery continued in the third quarter after Barclays (LSE:BARC), Lloyds Banking Group (LSE:LLOY) and miners including Glencore (LSE:GLEN) made big increases to their regular distributions.

The Computershare Dividend Monitor said payouts jumped 14.1% to £28.4 billion, with growth of 8.4% when excluding one-off awards the best third quarter result since 2019.

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Dividend growth was heavily influenced by a handful of large companies in the two sectors that were responsible for a record-breaking performance in the second quarter.

Banking dividends surged by 24.5% or £872 million to £4.4 billion after Barclays lifted its interim payout by 97% and NatWest Group (LSE:NWG) and Lloyds Banking Group increased their distributions by 26% and 30% respectively.

Higher-for-longer interest rates have boosted profits but also fuelled speculation that the sector will be targeted with an increased banking surcharge in Wednesday’s Budget.

With returns on equity at historically strong levels and capital ratios comfortably above regulatory requirements, banks are generating more surplus capital than they need to retain to grow their loan books.

That has led to materially higher ordinary dividends and continued share buybacks.

Standard Chartered (LSE:STAN) lifted its dividend by 66% in the quarter, but HSBC Holdings (LSE:HSBA) continued its practice of holding interim payouts steady and making larger changes as part of the final dividend.

Mining dividends rose 89.6% year-on-year, highlighting the sector’s willingness to return excess cash when commodity markets are favourable.

Glencore increased its regular distribution and also paid an additional special dividend of £736 million in relation to disposal proceeds from grain trading subsidiary Viterra.

Rio Tinto Ordinary Shares (LSE:RIO), which upped its interim dividend by 43%, overtook Shell (LSE:SHEL) as the UK market’s top payer in the third quarter.

Its underlying earnings jumped 43% and free cash flow rose 75%, helped by stronger copper and aluminium earnings on the back of higher commodity prices and better productivity.

Antofagasta (LSE:ANTO) and Fresnillo (LSE:FRES) delivered similarly large increases as higher copper, gold and silver prices translated into substantially stronger profits and cash generation.

Together, banking and mining accounted for nine-tenths of growth in the third quarter. Median dividend growth was 5% as 12 out of 20 sectors saw payouts rise year-on-year.

Sectors that struggled included media, where payouts dropped by 27.5% mainly due to a cut from WPP (LSE:WPP) designed to preserve balance sheet strength and free up cash to invest in its turnaround strategy.

In the retail sector, payouts fell by 7.1% as B&M European Value Retail (LSE:BME) and WH Smith (LSE:SMWH) both cut dividends as weaker trading and falling profits put pressure on cash generation.

Utility dividends rose by 7.2%, but this reflects an expanding capital base rather than growth in dividends per share. More than half of the increase came from SSE (LSE:SSE), which raised its final dividend by 10%, but paid it on a larger number of shares following its placing last year.

Payouts across the UK market are expected to fall year-on-year in the current quarter, but in light of the third-quarter performance Computershare has upgraded its forecast for 2026 by 1.4 percentage points to show growth of 4.8% to £87.6 billion.

Two-thirds of the year’s dividends are paid between April and September, meaning strong growth during this period should be enough to offset a sluggish start to the year and the slowdown in the fourth quarter due to a large cut from Diageo (LSE:DGE).

UK equities are set to yield 3.1% over the next 12 months, down from 3.2% in the previous quarter amid the impact of higher share price growth. This compares with a 10-year gilt yield of 5.4% meaning fixed income offers a historically wide yield premium over equities.

Computershare added that exchange rate movements have affected the headline growth rate much less than in recent years. If the pound holds its current level for the current quarter, the FX effect on the full year will be the lowest since the research began in 2007.

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