Mining companies quadrupled their payouts to £1.8bn over the second quarter but with dividends amounting to £19.1bn, the recovery was broad based. According to Capita’s report most sectors showed growth, with cyclically sensitive sectors growing dividends 35% in the second quarter compared to solid 13% growth from defensive companies.
Charles Cryer, Capita Registrars’ CEO says: “Dividends are finally flowing freely again. Miners have taken the spotlight as they continue to make bumper profits from booming commodity prices, but growth is coming from almost all corners of the market.”
Over the first half of 2011 dividends totaled £34.1bn, up 19% on last year. Capita now forecasts this year’s dividends will be 16.9% higher than 2010. That said, despite the recovery, in real terms, dividends will not catch up with 2008’s highs until 2012 at the earliest, but more likely 2013, according to the group.
In total over the first six months of the year, 403 companies paid a dividend, up from 372 over the same point last year and well up on the low point of 333 in the first half of 2009. Compared to the 210 firms that increased, reinstated or starting paying dividends over the second quarter, just 32 made cuts. Still Cryer says this shows the resurgence in payouts isn’t simply down to a few companies making big improvements and highlights the recovery is more general.
According to Capita equity yields now surpass those of 10-year gilts. The FTSE 100 is anticipated to yield 3.6% in total this year.
Still, Cryer points out there remain significant risks, most notably the Eurozone’s ongoing sovereign debt worries. “Finance directors may have relaxed their iron grip on corporate cash piles as the financial crisis has abated, but looming sovereign debt collapses in the eurozone may cause a renewed banking squeeze, leaving dividends back at the mercy of a need by companies to preserve cash for a return of tough times.”