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UK dividends hit new record in Q3 2012

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Dividend payments in the UK hit highest quarterly total of £23.2bn, up 10.4 per cent in the third quarter compared with last year, according to Capita Registrars.

Capita has increased its headline forecast for the full year by £300m, which would push the total dividends for the year to £78.6bn, including additional special dividends. This would surpass the pre-crisis peak of £77bn, the previous record annual total.

Despite the size of the payout, 10.4 per cent was the slowest quarterly growth rate since the fourth quarter of 2010. Capita’s underlying forecast growth rate next year is estimated at 8 per cent.

For the first nine months of the year, the total payout reached £64.6bn, a headline increase of 17.1 per cent, meaning that investors received more in the first three quarters of this year than they did in each of the full years 2007, 2009 and 2010.

The firm revealed 226 companies paid a dividend in the third quarter, down from 228 in the same period last year. Among these, 173 increased, started or reinstated their payments, 36 cut or cancelled them while 11 kept them the same.

Gross equity yields “continue to look attractive” compared with other investment alternatives, steady at 4.4 per cent for the next 12 months, said the firm.

Capita Shareholder Services chief executive Charles Cryer says: “The volume of cash being distributed by UK companies is unprecedented. The total for 2012 will be almost one sixth higher than last year’s record £68bn.

“Given the lack of high yielding alternatives, investors can be hugely relieved that equities are providing a decent income. Dividends cannot grow rapidly forever against the slower global economic backdrop, so the rapid increases of the last year or so may now be slowing down.

“It is also unlikely that special dividends will repeat their stellar performance next year.”

According to the Capita Registrars Dividend Monitor, the single biggest payer in the second quarter was Vodafone, paying its massive £3.5bn final dividend.The top five companies which accounted for 37 per cent of the total paid out in the third half were made up by Vodafone, Shell, HSBC, BP and National Grid. These five companies distributed £8.6bn in the third quarter.

The biggest cash increases came from miners, oils and chemicals. Cylical sectors increased their dividends 25 per cent in the first three quarters of the year, three times as fast as the 8.3 per cent rise in payouts from defensive companies. The weakest sectors in the third quarter in percentage growth terms were industrial engineering, software and general retailers.

In its outlook Capita says it remains concerned about the weakness of the economy both in the UK and around the world.

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