2025 was a strong year for UK dividend shares, with a total of £84.7bn paid out to shareholders. Yet looking ahead to the rest of 2026, the passive income earned by savvy investors could be even more impressive.
According to the latest analysts by Computershare, a total of £85.9bn in dividends is expected. And this number increases to £88.8bn when factoring in potential special dividends along the way.
A £1.2bn payout hike is quite an exciting prospect for index investors. But for prudent stock pickers, even more dividend growth could be unlocked this year. Here’s one dividend growth share that I’ve already added to my passive income portfolio.
A lucrative income opportunity?
While not the most exciting business in the world, Safestore Holdings (LSE:SAFE) has nonetheless proven to be a free cash flow printing machine.
Even during the last three years, when the self-storage industry suffered through a cyclical downturn, the business continued to produce enough excess cash to keep reinvesting, execute a wider international expansion strategy, and generate a reliable passive income stream from shareholders.
There’s no denying that growth was quite elusive. After all, a key driver of self-storage demand is activity in the real estate market since people need temporary storage when moving or renovating their homes. And with interest rates going through the roof, Safestore saw its occupancy take a hit.
However, skip ahead to 2026, and that could all be about to change. Occupancy is now back on the rise. The firm’s new storage facilities, which opened back in 2023 and 2024, have started to break even and contribute towards profits. And recovering demand is also granting Safestore some refreshed pricing power with both new and existing customers.
Needless to say, that’s great news for shareholders. Even more so, given that prior to the 2023 slowdown, Safestore was hiking dividends by an average of 12% per year!
What could go wrong?
While the operating environment for Safestore seems to be improving, it’s important to recognise that the timeline for recovery remains uncertain.
Self-storage growth in Europe is proving to be quite robust, supported by notably lower interest rates versus the UK. Nonetheless, the UK remains Safestore’s core market. And a slower-than-expected rebound in the property market due to economic weakness could leave investors waiting a while longer for a return to rapid dividend growth.
This macroeconomic risk also comes paired with Safestore’s own financial obligations. Funding the buildout of new stores required taking on a bit of debt. And the group’s total borrowings & equivalents as of October 2025 now stand at just shy of £1.1bn.
Given the firm’s impressive cash flow generation, this leverage is seemingly more than manageable. However, it nonetheless reduces the amount of excess cash available to fund payout hikes.
What’s the verdict?
Seeing Safestore’s dividend return to double-digit growth in 2026 might be a bit ambitious. But when zooming out to the next few years, analyst forecasts are becoming increasingly bullish. That’s why, despite the risks, I’m seriously considering topping up my existing position. And it’s not the only dividend share I’ve got my eye on right now.
