Both gas and oil prices had already been pushed up over winter as supply failed to keep pace with demand bouncing back from the pandemic. Since Russia’s invasion of Ukraine prices have been squeezed even further with oil soaring past $100 (£79.64) a barrel to heights of up to $130 (£103.52). The increased revenue from energy has helped deliver soaring returns for investors with the oil sector seeing dividends rise 29 percent in the first quarter of 2022 according to data firm Link Group. Link points to an “astonishing rebound in oil prices” which it says has “delivered a dramatic turnaround” for energy firms.
The contribution of energy firms helped drive up UK dividends by an average 12.2 percent on an adjusted basis.
Among the top 10 dividend payers for 2022 are Shell, BP and National Grid.
The growing profits for energy firms has attracted criticism given the UK’s current cost of living crisis with some calling for a windfall tax on the gains.
So far though the Government has dismissed the idea with Justice Secretary Dominic Raab calling the idea “disastrous”.
“Meanwhile the oil sector is back – both in the black and in the headlines – though its distributions would have to double to regain pre-pandemic highs. In inflationary times, investors have often looked to commodities like these as a hedge against rising price levels elsewhere in the economy.”
While much of the growth in dividends has been driven by soaring commodity markets, healthcare has also appeared as a big factor thanks mainly to an increase in the size of AstraZeneca following its acquisition of rare disease specialist Alexion.
The Covid vaccine maker ranked as number 1 among the top dividend payers for quarter one of 2022, up from second place the year before.
Overall Link found an average return of 3.7 percent for investors in UK companies.
David Smith, Manager of Henderson High Income Trust, described the UK as “an attractive market for income” with dividends “significantly above the yield available on bonds or cash”.