While the majority of the country is facing what looks more and more like a grim winter this year, with escalating energy costs and rising inflation on everything else – some are having a great time, driven largely by soaring energy profits.
On the one hand – the CEOs of Britain’s biggest companies will have earned more money in 2022 by Thursday afternoon or just 38 hours work than the average UK worker will earn in the entire year.
On the other – investors in British companies are now getting higher dividends this year than previously forecast. Higher oil and commodity prices for many companies mean a bigger turnover and therefore bigger profits. This also means that shareholder payouts are expected to be bigger than originally forecasted.
The FT reports that – Listed UK companies are on track to pay out £92bn to shareholders in 2022, including one-time payments, roughly in line with last year’s tally, according to funds group Link. The latest prediction marks an improvement from forecasts made at the start of the year. It follows a surge in oil and commodities prices that has boosted the businesses of energy and mining groups. These are heavily represented on the London stock market. “We anticipate the rest of the year to surpass our expectations. The war in Ukraine is partly responsible as it has pushed oil and metals prices ever higher, driving strong profits in related sectors,” said Ian Stokes, managing director of corporate markets for the UK and Europe at Link. Dividend levels hit turbulence after Covid-19 struck, tumbling in the first year of the pandemic as companies conserved cash but then rebounding strongly in 2021 as businesses surfed the economic recovery. Despite the improvement, the 2022 forecasts still put payouts 18 per cent lower than in 2019.
It won’t surprise you to know that it was the “mining boom”, prompted by surging prices, that has contributed about 80 per cent of the uplift in forecasts for this year. This means underlying dividends are set to hit £86bn this year.
In addition, share buybacks, the other main route by which companies return money to shareholders, also enjoyed a bumper quarter. British listed companies have so far this year announced plans to buy back their own shares worth more than £33bn. It looks like 2022 will be a year that easily breaks the previous annual record of £35bn set in 2018.