We have all learned some important lessons over the past two years. Even investors can be classed amongst those who have at times learned the hard way. Because, although they bounced back to end the year in a stronger position than we had seen throughout the pandemic, UK dividends remain below their pre-Covid level.

Indeed, Covid caused more than just a health crisis. It was to become the perpetrator behind many of the unforeseen economic decisions too. The Bank of England stepped in forcing banks to temporarily pause dividend payments altogether, as companies also frantically tried to preserve their cash.

In summary, 2020 was far from promising for those who relied on UK company dividends as an income source. UK plc saw the total dividend payments fall by 43%, dropping to about the same levels as those of almost a decade before.

Although the end of 2021 saw an impressive rebound of UK dividends, with total payments rising again by 46%, it doesn’t take a master mathematician to see that this surge still leaves much to be desired on the dividend payments front. In fact, it would have taken a mammoth 75% rise to have even put dividends back to the 2019 level.

Year-end data from Link Group, one of the UK’s leading share registrars, gave a slightly more upbeat perspective, greater than their anticipated best-case scenario of 10% growth. And helped in part by some ‘special dividend payments’ from reorganisations and spin-offs. Which, if removed from the overall data would leave a year-on-year increase calculation of 22%.

 

So, what have investors learned from the UK dividends bounce back?

1. Invest, buy, and hold - Warren Buffett once wrote, “If you aren’t willing to hold a stock for 10 years, don’t even think about holding it for 10 minutes.” This has never been more true than in the pandemic, when panic selling of shares proved dangerous for many investors.

Those who sold out as UK dividends payments dried up would have earned minimal interest by leaving their proceeds on deposit. They could have reinvested quickly to avoid too much of an income loss. But realistically, even the most experienced could not have envisaged this level of market volatility, nor timed their re-entry to the markets with the UK dividends bounce back to that level of perfection.

Ironically, Buffett himself learned that holding steadfast could have been the most lucrative option, and a lesson to be remembered.

2. Now is the perfect time to invest – it might be tempting to hold off from re-entering the market or investing first time. Waiting for signs of a steady improvement could be costing you day by day. And even with slight increases in the Bank of England deposit rates, the UK dividend yield will reap more than the 0.25% uplift if you are considering investing for income.

Stocks and shares have never been for the faint-hearted, who are unable to stomach losses as well as revel in the positive returns.

But with the right expertise, such as our team here at Simpson Financial Services, to guide your investment choices, why not now? A comprehensive financial review is a great place to start if you are thinking of expanding your investment portfolio, or unsure as to where your deposits would be best placed if you are a novice in the markets. Contact us today to discuss the potential for UK dividends and we can arrange your personal financial planning meeting.

3. The Covid bear market - grizzly as it may sound, the sudden plummet in the market in the midst of the pandemic proved to be relatively quick and painless in comparison to previous such downturns. In fact, it is now known as the ‘quickest bear market in history’.

In contrast, I’m sure we all remember the dot-com demise, and the housing boom and bust? Market recovery then was slow and painful, and has put certain sectors to the back of the queue in the minds of investors since. But far better the short, sharp shock of the Covid bear than a lengthy loss-bearing dividend dive.

4. Become tech savvy – it’s not too late to jump on the tech train to benefit from UK dividends. We may have learned lessons from specific sector transactions in the past, but now is as good a time as any to be seeking strong dividend growth in the world of technology.

Our sector specialists monitor market performance on your behalf, but one thing is certain, technology is not disappearing any time soon! So speak to our team of Independent Financial Advisors to learn how you can spread your bets safely to secure your financial prospects.

5. Rainy day fund – for many of us, the immediate positive financial impact of lockdown and isolation was felt in our savings. Unable to holiday abroad, or even closer to home, for many months. Less socialising, no new car purchases, and coffee shop treats left us with more ‘money than month’.

But don’t let that lull you into a false sense of security! No matter how your individual financial situation may have looked during the pandemic, as we are starting to move into the new normal, an emergency fund should still be high on your financial planning priorities.

If you were fortunate enough to receive an annual bonus or pay rise, or have been left with a welcome excess in cash, investing in stocks and shares could reap rewards in UK dividends. But our financial experts will always advise factoring in your future financial needs, particularly when considering longer-term investments. Make sure you have enough to hand for any unexpected costs, and the rather unfortunate imminent increase in energy bills.

So, what now?

 

Want to know more about your options for investments and UK dividends?

Simpson Financial Services is the company to call for all your financial planning needs.

From pensions and retirement planning, mortgage advice and investments, to estate planning and making a Will, we have specialists in each sector. As an Independent Broker, we have your best interests at the heart of all we do. Taking the time to get to know you, your individual circumstances, and your financial goals, means we can effectively guide you through the pros and cons of products many other lenders and financial institutions cannot even access.

We hope you have found this post useful. And if you are wanting to know more about long-term investments and your chances of growing your UK dividends income, give us a call today.

 


Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

These investments do not include the same security of capital which is afforded with a deposit account.  The value of an investment can go down as well as up. Past performance is not a guide to future performance.

The content of this blog is for information only and must not be considered as financial advice.  We always recommend that you seek independent financial advice before making any financial decisions.