The UK has a rich history of paying dividends to shareholders and historically, it has been a happy hunting ground for income. This reputation has taken a hit in recent years as Brexit uncertainty and the Covid-19 pandemic have seen the UK lag behind its developed peers. More recently, however, the outlook for the UK market has improved markedly.

The Brexit trade agreement has removed much of the uncertainty that imposed large discounts on UK stocks. As a result, UK stock market valuations are cheaper when compared to international peers, despite the strong performance experienced recently. The successful vaccination rollout and release of pent-up consumer demand have also led to increased optimism about the prospects for the UK economy. Meanwhile, dividends have staged a solid rebound to begin the year and are forecast to grow by 24.4%in 2021.¹

Could this turnaround mean that investors may be returning once more to the UK market for the primary reason they always used to – dividends.

¹Link Group, UK Dividend Monitor – Q2, 2021, as at 16/09/21

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