Investors rely on dividends as a consistent source of income and an important component of their overall returns. Understanding the UK dividend calendar is critical for making informed decisions and optimising your financial benefits in the United Kingdom, where dividend payments play a vital role in the stock market.
This guide will discuss the complexities of the UK dividend calendar, investigating which factors affect it and why you should buy dividends.
Dividend Calendar in the UK: Companies’ Legal Obligations
UK companies operate under stringent legal obligations designed to uphold fairness and transparency in shareholder payouts. For directors and shareholders, grasping these obligations is not just important but fundamental. Below are the legal obligations guiding the UK’s dividend companies:
- Defining Distributions: Distributions go beyond traditional dividends, encompassing any value transfer to shareholders or related parties. Whether it’s dividends, remuneration, loans, or other transactions, their substance matters more than how they’re described in documents. Directors must understand these implications, ensuring meticulous documentation through minutes or resolutions.
- Unique Nature of Dividends: Dividends, as post-tax profits distributed to shareholders proportionally, adhere to the company’s articles. Crucially, companies can only pay dividends from profits available for distribution under company law. Directors can face personal liability for illegal dividends, underscoring the need for strict compliance.
- Calculating Available Profits: Determining available profits starts with the latest annual accounts, where the balance sheet reveals “retained earnings” or “profit and loss reserves.” Dividends draw from realised profits, usually from regular trading activities, avoiding unrealised profits from revaluations or intra-group transactions.
- Accounting for Financial Changes: Directors must assess financial changes since the last accounts. Diminished realised profits due to subsequent losses can’t fund dividends. Conversely, improved financial positions might allow extra dividends, necessitating new interim accounts following annual account principles.
- Practical Considerations: Directors must weigh practical implications, considering cash flow and loan obligations. Post-dividend solvency evaluation is vital. In financial distress, seeking professional advice becomes pivotal in guiding decisions about dividends and financial stability.
- Considerations for Groups: Individual distribution availability is assessed at the individual company in group structures. Accumulated losses might hinder dividends, even if the group shows profits. Intra-group transactions require meticulous scrutiny, often requiring professional assistance.
- The Dividend Payment Process: Adherence to legal tests is paramount. Realised profits must cover dividends, be declared through ordinary resolutions, and stay within recommended limits. Articles of association outline payment procedures, with “final” dividends annually approved and “interim” dividends possible at any time. Robust records substantiating dividend legality, including accounts and meeting minutes, are indispensable.
What are the Benefits of Dividends for Investors?
Dividends hold several benefits for investors, old and new alike. Here are a few:
- Growth and Expansion of Benefits: Investing in dividend-paying companies offers stability and growth. Established firms often increase dividends annually, a trait seen in “dividend aristocrats,” firms raising payouts for over 25 years. The S&P Global Dividend Aristocrats saw a 2.72% annual return. With fluctuating stock values, stock market investing carries market risk, but dividends act as a safety net. While not a guaranteed route to wealth, dividend stocks offer reliable returns. These companies rarely halt payouts; most even increase them over time, making them a solid investor choice.
- Tax Advantages: Dividends are a tax-efficient way to earn income. Qualified dividends receive special treatment. Those in higher tax brackets (around 35% or 37%) are taxed at 20%, and those with income tax rates between 12% and 35% drop to 15%. Individuals in the 10% or 12% brackets pay zero tax on qualified dividends. This tax advantage means you keep more of your money, making dividends a wise choice for income, offering both substantial earnings and tax benefits akin to a rewarding bonus.
- Reinvesting: When you receive dividend payouts as an investor, you’ve got options. You can use that cash for your expenses or reinvest it into the same stock.
Reinvesting those dividends back into the same stocks isn’t just a smart move; it’s like planting seeds that grow into a money tree. This investment strategy is known as Dividend Compounding. It’s like fueling the fire when you consistently reinvest your dividend payouts in the stock market. It helps you supercharge your returns effectively. By doing this, your money doesn’t just grow; it multiplies over time, creating a snowball effect of wealth. So, it’s not just about the initial investment; it’s about the smart choices you make with those dividends that can turn a good investment into a great one. It’s like turning one piece of the pie into a whole dessert buffet!
How Have Dividends Evolved in the UK in 2023?
In 2023, the dividend landscape in the UK experienced significant shifts, reflecting a complex interplay of economic factors, policy decisions, and investor sentiment. Despite the FTSE 100 facing stagnation reminiscent of the summer of 2017, dividends were far from static.
The year started with a departure from the ‘There Is No Alternative (TINA)’ mindset, which had long favoured equities due to low inflation and rock-bottom interest rates. Rapid interest rate hikes by the Bank of England revived interest in cash investments, theoretically promising better returns. Simultaneously, the bond market gained ground, with ten-year Gilt yields at 4.36%. Even two-year Gilts offered nominal yields of 5.17%, leading to the creation of a new term – ‘TIARA’ or ‘There Is A Real Alternative.’
Amid these changes, concerns loomed over FTSE 100 earnings and dividend forecasts for 2023. The 4.1% forecast yield for the year relied on a 19% surge in pre-tax profits and a 10% increase in dividend payments. However, scrutiny revealed a more nuanced reality, with adjusted net income, accounting for UK corporation tax and exceptional items, projected to drop by 7% in 2023, raising questions among astute investors.
Despite challenges, the FTSE 100’s total dividend pay-out was expected to reach £83.8 billion in 2023, a significant increase from £76.1 billion in 2022 and £78.5 billion in 2021 (excluding special dividends). While promising, this figure fell short of the peak in 2018 when dividends reached £85.2 billion. Initial expectations for 2023 had set a more ambitious tone, eyeing a new record of £86.7 billion. However, this goal seemed increasingly elusive as the year progressed, reflecting concerns that the FTSE 100’s economic challenges might impede dividend growth.
Heading towards 2024, the dividend landscape retained a sense of cautious optimism. Projections indicated dividends would rise to £89.4 billion, although these estimates had undergone slight revisions due to evolving market conditions. Analysts adjusted their figures, highlighting the volatility and uncertainty that continued to characterise the UK’s dividend landscape.
What Factors Affect the Dividend Calendar in the UK?
Numerous factors that represent the complex interaction of economic, regulatory, and company-specific dynamics affect the dividend calendar in the UK. As a result, businesses’ profitability and capacity to pay dividends are substantially impacted by economic conditions, such as interest rates, inflation rates, and general market stability.
The framework within which dividends are declared is determined by regulatory requirements and legal obligations, particularly those relating to the availability of profits for distribution.
Additionally important are company-specific elements, including financial performance, liquidity, and strategic goals. The timing and amount of dividends might also be unpredictable due to external factors, including world events, market mood, and industry developments.
Moreover, the management’s decisions, influenced by their assessment of the company’s financial health and prospects, further impact the dividend calendar, making it a multifaceted reflection of internal and external forces.
What are the Most Important Dates for Dividends?
To understand when you need to own shares to be eligible for dividend payouts, you should be familiar with the following crucial dates:
- Announcement Date: This marks the moment when the Board of Directors formalises the dividend, specifying both its amount and the terms of distribution.
- Ex-dividend Date: This is a pivotal deadline for acquiring shares if you wish to receive dividends. It precedes the collection date by approximately three to four days. Adherence to this date means that investors will wait until the next distribution.
- Record Date: Following the ex-dividend date, the record date is when the company identifies qualified investors who are entitled to receive dividends as rightful owners of the company.
- Payment Date: On this day, the company fulfils its dividend commitment as announced. Investors who registered before the ex-dividend date will receive their distribution, which can be cash, shares, or a combination of both.
It is important to mark these dates on your personal stock market calendar for informed and strategic investing.
Calendar of the Upcoming Ex-Dividends this Year
Let’s start this calendar with the list of dividends that will still be distributed in the remaining part of this year.
|Name||Share Price||Dividend||Dividend Impact||Ex-Dividend Date|
|Pembroke VCT B||107.5p||2.5p||2.33%||26-Oct|
|Tufton Oceanic Assets||$0.99||$0.02125||2.15%||26-Oct|
|Banco Santander S.A.||305.5p||€0.081||2.31%||31-Oct|
|Crown Place VCT||31.5p||0.83p||2.63%||02-Nov|
|Maven Income & Growth VCT||39p||1p||2.56%||02-Nov|
|Blackstone Loan Financing||€0.57||€0.02||3.51%||02-Nov|
|Octopus Apollo VCT||50.5p||1.4p||2.77%||23-Nov|
|Canadian General Investments||2085p||C$0.24||0.69%||29-Nov|
|Octopus Titan VCT||65p||2p||3.08%||30-Nov|
|Albion Technology & General VCT||73.5p||1.9p||2.59%||07-Dec|
History of the Best UK Equity Dividends in 2023
In 2023, UK equity dividends is influenced by global economic factors and domestic policies. FTSE Russell data showed that 82% of FTSE 100 companies’ income came from overseas markets, making the pound’s strength against currencies like the US dollar crucial for corporate earnings.
Currency exchange intricacies meant a weaker pound led to higher reported earnings when US dollar revenue was converted to Sterling. Changes in the Bank of England’s base rate played a significant role, negatively impacting companies reliant on exports during rate hikes. Amidst this, fluctuating inflation (from 8.7% in May to 7.9% in June) remained a concern, exceeding the 2% target and affecting predictions of a base rate increase to 5.75% by year-end.
Selection of the Best First-Quarter 2023 Dividends
|Name||Share Price||Dividend||Ex-dividend date|
|British American Tobacco||2455.00p||57.72p||23-Mar-23|
Selection of the Best Second-Quarter 2023 Dividends
|British American Tobacco||57.72p||13-Jul-23|
|Game Workshop Group||50p||28-Sep-23|
How to Choose the Best Broker to Invest in Dividend Stocks
Choosing the best broker is not just a one-time task; it’s an ongoing process that demands active engagement. Diligently follow these steps to ensure a fulfilling investment journey:
Understand your Needs
It’s critical to determine your unique needs based on your investment goals, risk appetite, and experience before diving into online brokerages. Beginners may place more importance on fundamental characteristics like support services that are easily accessible and educational resources.
Those with some experience might look for more sophisticated products, such as expert insights and a variety of data that allows for well-informed decisions. Experienced investors concentrate on features like sophisticated charting and various trading alternatives to make informed decisions. Making a decision based on your needs will guarantee that you have the tools necessary to succeed in the challenging world of investments. Make intelligent decisions that align with your goals.
Streamline Your Choices
Now that you’ve defined your investment objectives and the fundamental services you require from your ideal brokerage, it’s time to refine your options. While every investor’s priorities may differ, there are some non-negotiable features that any trustworthy online brokerage should offer. These core requirements include:
- Broker’s security and regulations in the UK.
- Investor protection in the case of bankruptcy.
- Investors’ opinions and ratings on valuable platforms like Trustpilot.
- The broker’s security to keep your account safe.
- The financial instruments broker offers.
These are the most important criteria a broker must tick before you decide it’s the best for your investment plan.
Service Fees and Account Costs
Calculate the fees associated with the brokerage service. While some features might justify a slightly higher cost, aim to minimise fees to preserve your investment returns. Compare fees across different brokers to make the best decision.
Test the Trading Platform
Use the broker’s trading platform for a test drive. Open a free account if available, and explore the platform’s features. Assess its usability and access to quotes, data, and investment screeners.
Some brokers have a Demo account, so use the account to test run the broker’s features to get familiar before the live market. A seamless experience is crucial for efficient trading!
Explore Educational Resources
Brokers shouldn’t only provide access to the financial market. It’s important they provide their customers with adequate information and trends about the financial market. Therefore, Investigate the educational resources offered by the broker.
A comprehensive learning platform with easily accessible information is invaluable, especially for novice investors. Ensure it provides clear explanations and tools for understanding market metrics and investment terms.
Evaluate Customer Service
The broker’s customer service is one to reach out to if you have any difficulty on the platform. Hence, an ideal financial broker should have accessible customer service working around the clock.
Examine the broker’s customer service options. Prompt and efficient support can be a lifesaver, especially in times of confusion or technical issues.
Consider Deposit and Withdrawal Processes
The ease of deposit and withdrawal is essential in your choice of a broker. An ideal broker should allow a wide range of payment methods. Understand the ease of depositing and withdrawing funds. Transparent and straightforward procedures are essential, especially if you plan to rely on your investments for regular income. Review settlement times and withdrawal terms to make informed decisions.
Finalize Your Choice
Based on your evaluations, narrow down your options to one or two brokers that align with your requirements. Ensure the chosen broker meets your current needs and offers scalability for future endeavours.
Where to Buy Dividend Stocks in the UK? List of the Best Brokers
Whether or not you are considering investing right now, you must know where to go when it’s time. So here are the best brokers in the UK in 2023:
- Interactive Broker
Degiro is a financial institution founded in 2008 and made its debut to the UK in 2015. Since then, it has provided UK investors access to over 5,500 stocks and 1,500+ ETFs. You can include all these financial instruments in your dividend portfolio with it highly competitive commission stricture.
As a UK broker, Degiro is regulated by the Financial Conduct Authority (FCA). In the unlikely event of bankruptcy, Degiro falls under the purview of the German Investor Scheme, and your capital loss will be compensated with up to 90% of your investment capped at £20,000.
Degiro pays dividends like every other broker, following the legal obligations and process involved. It also provides relevant documents like W8-BEN for European clients for withholding tax.
Learn more about the broker from our Degiro Review.
XTB is a reputable trading platform and financial brokerage service provider authorised by the UK’s FCA and other regulatory bodies in the countries it offers its services. It gives investors access to stock and fractional shares, Forex, Indices, ETFs, and commodities to trade as CFDs and spread bets.
Investments in the XTB stock and fractional shares allow you to collect dividend that is proportional to your investment. You have access to over 1,900 shares.
Learn more about XTB from our XTB review.
3. Interactive Broker
Interactive Broker is a traditional US-based broker with a long track record of success in the financial world. Established 46 years ago, the broker is secure and is regulated and authorized by the SEC in the US, FCA in the UK, and other regulatory bodies in the countries in which it operates.
The broker offers products including Stocks (and fractional shares), Investment funds, ETFs, Bonds, Options, Forex, and commodities across Europe in more than 150 markets, 33 countries, and 23 currencies.
The financial instruments from this broker fit in a dividend portfolio. Hence, you can invest in companies’ stocks or ETFs and get paid according to the investment profit and size.
For more information about the Interactive Broker, check our Interactive Broker Review.
FAQs about the UK Dividend Calendar
What are the three most important dividend dates?
Investors in dividend equities should be aware of the ex-dividend date, record date, and payment date. The ex-dividend date decides which stockholders will receive dividend payments. The record date is the day that a shareholder must be on the books of the corporation in order to collect the dividend. Finally, the payment date is the date when the dividend is distributed to shareholders.
Is it preferable to purchase a stock before or after the ex-dividend date?
To receive a dividend from a corporation, an investor must purchase the stock one or more days before the ex-dividend date. An investor will not get the dividend if the stock is purchased on or after the ex-dividend date.
Which stock has the highest dividend yield?
Given the volatile nature of the stock market, the highest dividend-paying stock can change. Instead, investors frequently seek out the top high-dividend companies, which are noted for their consistent and appealing returns.
When are dividends paid?
Dividends are normally given on a quarterly basis, but they can also be paid monthly or annually. Dividends declared as a special dividend are one-time payments made by the corporation.
Do I receive a dividend if I sell on the ex-date?
Yes, if an investor sells out of a stake on the ex-dividend date, the investor retains ownership of the company’s shares as recorded in company books.
Approximately two weeks after the ex-dividend date, investors should receive a dividend.