Shareholders set for strong payout boost
SHAREHOLDER dividends are poised to hit their highest level for three years - boosted by the recovering UK economy, a report said.
Payouts to stockholders on an underlying basis are projected to come in at £84.1billion, 6.4 per cent higher than last year and the biggest figure since 2012, according the latest UK Dividend Monitor from shareholder body Capita Asset Services.
The body said the underlying trend for dividends in the first quarter of the year "got off to a strong start", growing by 10.4 per cent to £14.75billion, the fastest rate in three years.
Capita said the reasons behind these dividend rises are the recovering UK economy - which is growing at its fastest pace since 2006 - and the strength of the US dollar, which sees a number of FTSE350 firms make payouts in this currency.
The US dollar has risen by 12 per cent compared to the pound in the first quarter, and 53 firms in the FTSE350 pay their dividends in that currency, amounting to £33.8billion last year.
Challenges remain, not least in the supermarket sector
During the first three months of the year, oil companies such as BP and Royal Dutch Shell boosted payouts by 16 per cent, principally due to positive currency effects.
A number of other sectors did well, with mining, chemicals, construction, general retailers and property among the industries that all posted doubledigit payouts.
The report said the healthcare and utility sectors underperformed the rising trend. The survey added that mid-cap firms in the FTSE250 outperformed their larger FTSE100 rivals last year, growing by 7.5 per cent on an underlying basis, compared to growth of 0.7 per cent in the top flight.
Capita said this greater growth reflects the greater exposure of the mid-caps, who have fewer operations abroad, to the rapidly growing UK economy.
Justin Cooper, chief executive of Shareholder Solutions, part of Capita Asset Services, said: "This year is off to a flying start for income investors, boding well for the full year.
"At last we will see strong growth this year, after a disappointing couple of years for dividend growth."
The £14.75billion headline figure for dividend growth in the first quarter is 52 per cent down on a year ago.
However, last year's figures were skewed by Vodafone's world-record £15.9billion special dividend following the disposal of its stake in US rival Verizon.
The figure was also affected by Barclays delaying its final dividend by five days, which shifted £630million of first-quarter payouts into the second quarter.
Cooper added: "Challenges remain, not least in the supermarket sector, where the payouts are vulnerable. Shareholders are bearing the cost of the sector's price war.
"But the reinstatement of Lloyds Bank's dividend will give investors optimism, marking a milestone for the recovery of the market."
