uk investors see largest ever dividends

Dividend payments in the third quarter of the year reached a record high of £23.2bn, up 10.4% on the same period last year, according to a report published today.

uk investors see largest ever dividends

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This took the dividend total for the nine months to the end of September up to £64.6bn, an increase of 17.1% year-on-year and also the largest ever payment total over such a timeframe.

The research, published by Capita, said the increase in payments since the start of January was the equivalent of an additional £9.4bn in investors’ pockets.

"Firms are enjoying healthy free cash flows and are not investing in new capacity without robust demand to justify the spending.

Investors meanwhile are crying out for income, unable to find it anywhere else. These two forces are combining to keep dividends growing strongly," Capita said.

To put the payments further into perspective, Capita said the Q1 to Q3 total this year is greater than the annual payouts of 2007, 2009 and 2010 put together.

A significant portion of this has come from special dividends, which Capita described as finance directors’ "favourite bauble to dangle in front of investors" because they allow companies to reduce their cash piles without rebasing the growth rate attributed to the ‘regular’ dividends.

"This means they will, in future years, be able to point to continued ‘regular’ dividend growth even when they are no longer making big special payments," Capita added.

Year-to-date, special dividends have totalled £6.4bn, £800m more than the combined totals of 2008-2010 inclusive, and 2.7 times the amount paid out in the first three quarters of 2011, which was already a record.

But Capita also questioned the sustainability of such bumper divided payments due to the big contribution of one-offs.

In its outlook the firm said: "For the full year 2012, we are upgrading our forecast again, this time by £300m. Special dividends are again the main reason for the increase. Indeed the slightly slower underlying growth in the third quarter would otherwise have meant we would have trimmed our forecast by a tiny £100m."

The formal forecast for 2013 is £81bn, only 3% higher than 2012, but Capita explained this "apparent lack of progress" is due to the fact they do not attempt to forecast special dividends and because they are unlikely to be able to repeat the huge level of 2012.

 

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