United Kingdom dividends up after boost from miners

Bruno Cirelli
Luglio 17, 2017

Dividends paid out by United Kingdom firms have hit an all-time record of £33.3bn for the second quarter of 2017. A total of 20 companies paid specials, again the second highest number in any quarter on record.

But even discounting the currency effect, underlying dividends still rose by 7.8%, which was the fastest growth in two years, according to the report.

Underlying dividends, excluding specials, reached £28.6bn, which was also another record and a 12.6 per cent year-on-year rise. National Grid paid its shareholders an extra £3.2bn on the sale of its 61% stake in its United Kingdom gas distribution business and more money is expected to come to shareholders via its share buy-back.

Althoufh the financial sector is the largest, its dividends were increased at a slower than average rate according to the study.

Turning to underlying growth, it cites 7.4%, bringing dividends to a record £84.4bn, a £200m decrease on its previous forecast.

Growth was particularly strong in the resurgent mining sector, while consumer goods and housebuilders also performed well, with every company raising its payout.

'The gloves came off in the second quarter, as United Kingdom plc limbered up to deliver a knockout year in dividends, ' said Capita's chief executive for shareholder solutions Justin Cooper.

Such a strong quarter has led Capita Asset Services to upgrade its 2017 forecast for headline dividends to record £90.6bn, up 7.0% year-on-year. Despite a likely much quieter second half, thanks mainly to one-off factors and the elimination of exchange-rate effects, it now expects 2017 headline dividends (ie including specials) of £90.6bn. Those helped take the sting from the removal of Sky's scheduled dividend as it awaits clearance of its purchase by parent group Fox.

Sterling's slide since last June's European Union referendum has given a lift to many dividend payouts, as it means major firms with overseas earnings enjoy a currency tailwind when converting them back into pounds.

"This is emphasised by the fact that the yield on the FTSE 100 in 2016 was 3.99% and is expected to be 4.16% in 2017".

"Exchange rate gains have come not only for big multinationals declaring dividends in foreign currencies, but also for others with overseas operations, or export sales, supercharging their profits and so their dividends", he said.

"Shareholders can be thankful they had punchy special dividends and the weak pound in their corner, but improving profits have also played their part".

"Even though the second half is going to be much quieter, investors can look forward to dividends hitting a new record this year".

"The relative strength of the United Kingdom consumer, until recently at least, and surging economic growth overseas has supported stronger dividend growth than we have seen in some time".

"Most of the excitement for 2017 is now behind us".

This may surprise some investors, who thought the United Kingdom economy was on the ropes, thanks to political and Brexit wrangles.

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