UK income investors about to receive £2bn dividend windfall

There are some big income generators in the FTSE 100 and FTSE 250, and a bunch of them are paying generous dividends over the next few weeks. These are the ones to watch out for.

Dividends worth over £2 billion will flow into accounts this week as shareholders at eight companies get a new year reminder on the income power of the FTSE 100 index.

Widely held National Grid (LSE:NG.), 3i (LSE:III) and Severn Trent (LSE:SVT) are scheduled to make their payments tomorrow before GSK (LSE:GSK) on Thursday and Associated British Foods (LSE:ABF) on Friday. Cheques from Smith (DS) (LSE:SMDS) and Burberry (LSE:BRBY) hit doormats nearer the end of the month. FTSE 250 housebuilder Bellway (LSE:BWY) pays out tomorrow.

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The payments should be well received by retail investors amid the ongoing cost-of-living crisis and following the dividend drought seen in the early part of the pandemic.

Shell (LSE:SHEL) and BT Group (LSE:BT.A) were among those to slash their payments at the onset of Covid, but since then companies have wasted no time rebuilding their returns of cash to shareholders.

And for UK-focused investors, there are few better places to generate an income.

Link Group recently forecast the FTSE 100 will yield an average 4.3% this year, well ahead of current best buy cash savings rates as well as other global stock markets. But for investors prepared to stomach a greater level of risk, there are significantly higher yields on offer in housebuilding, mining or banking.

In contrast, the reliable revenue streams of the regulated power and water sector provide investors with more predictable and inflation-linked returns.

They include at electricity and gas transmission and distribution firm National Grid, whose dividend outlay is set to be the largest in the FTSE 100 index during January.

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The payment amounting to around £653 million follows a 3.7% increase in its half–year dividend to 17.84p, equivalent to 35% of the overall total paid in 2021/22. Those on National Grid’s shareholder register on 25 November will be entitled to the payment.

Some 300,000 National Grid shareholders have between 100 and 500 shares, meaning they will receive anything from £17.84 and £89.20 tomorrow. Another 85,000 have between 501 and 10,000 shares and there are 300,000 whose ownership is less than 100 shares.

The company, which has been listed on the stock market since 1995, pays dividends twice a year based on full and half-year results announcements in May and November. Subject to approval at the July AGM, the full-year dividend is typically paid in August.

Over the last 10-year period, National Grid’s total shareholder return has been 194% versus the FTSE 100 at 82%. Over a more recent three-year performance period, the return was 52% versus the FTSE 100’s 13%.

Among other companies paying tomorrow, water company Severn Trent is due to hand out £107 million based on the recent award of a dividend of 42.73p a share. Private equity firm 3i Group has set aside £226 million based on a 23.25p a share dividend.

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One of the most-prized dividend payments of recent years has come from GSK, having handed out a steady 80p a share every year since 2014. However, last summer’s demerger of consumer healthcare business Haleon (LSE:HLN) means GSK investors are coming to terms with some different figures.

Thursday’s planned payment of 13.75p a share is worth £555 million and should be matched with a similar dividend following fourth-quarter results. The figure for 2023 is due to be around 56.5p a share.

Among the other big FTSE 100 payers this month is Primark owner Associated British Foods, which is due to hand over £235 million based on a final dividend of 29.9p a share. Paper and recycling giant DS Smith and fashion house Burberry set interim dividends at 6p and 16.5p respectively, so will return around £83 million and £63 million.

Like the other housebuilders, Bellway has had a tough time the past few years, certainly in terms of share price performance. However, it has found £117 million to return to shareholders via a 95p final dividend approved at the AGM in December.