Investors are anticipating the return of bumper special dividends and payouts from the banking sector amid an improving outlook for income in the UK equities market.
Adam Vettese, analyst at eToro, said that despite Shell's share price sitting "significantly lower than two years ago, at barely half the value", the oil major's first quarter was a positive one, reporting earnings ahead of expectations and raising its quarter-on-quarter dividend.
"While the world is changing and becoming greener, we are simply not going to stop using fossil fuels overnight, and Shell and its peers are well placed to benefit as we continue to recover from the pandemic," he said.
Special dividends have skewed the concentration of payouts more heavily to FTSE 100 companies than before, according to Brendan Gulston, co-manager of the LF Gresham House Multi Cap Income fund, who noted the top five dividend payers in Q1 2021 represented 56% of all UK dividends.
"In fact, although dividends in Q1 2021 declined by c.27% on an underlying basis, if you include specials, the headline figure showed c. 8% growth,"
"We believe it is critical to look beyond any short-term volatility to identify longer-term sustainable sources of income and income growth, and to be able to have flexibility across the market cap spectrum to find attractive underlying long-term dividend paying stocks."
Prior to the coronavirus pandemic, many firms that had been "over-distributing permanently" were forced to reset their dividends to "more sustainable levels", according to Willis Owen's Adrian Lowcock.
"2020 was an eye-opener which highlighted the fact that many companies' yields were too high and unsustainable," he explained.
"From here the quality in equity income in the UK is much improved - some companies have reset their dividends to manageable levels, whilst other sectors should return now the political and economic pressure is easing.
"While it may take a few years for yields to get back to 2019 levels, investors should be able to recover more quickly by focusing on the quality."
Link Group anticipates that 2025 is the earliest realistic point that UK dividends will recover to their 2019 levels.
"Despite the greater clarity, 2025 still looks like a realistic moment for UK dividends to finally match their 2019 underlying high point," said Stokes.
"If the recovery is stronger than we anticipate we will hope to bring this target forward in future editions of the Link Group UK Dividend Monitor."