Share­hold­ers re­ceive a £33bn div­i­dend bo­nanza

The Guardian - - FINANCIAL - Si­mon Good­ley

In­vestors are en­joy­ing a stel­lar 2017, with ris­ing share prices be­ing sup­ple­mented by record-break­ing div­i­dend pay­ments, new re­search shows.

Share­hold­ers in com­pa­nies listed on Lon­don’s main mar­ket re­ceived £33.3bn in pay­ments dur­ing the sec­ond quar­ter of this year, up 14.5% year on year, ac­cord­ing to the lat­est anal­y­sis by Capita, a ser­vices com­pany.

The growth, which has come on top of ris­ing share in­dices dur­ing 2017, is at­trib­uted to high spe­cial div­i­dends and large gains be­cause of move­ments in for­eign ex­change rates.

Af­ter strip­ping out one-off pay­ments of spe­cial div­i­dends, un­der­ly­ing re­ceipts to share­hold­ers rose by 12.6%.

Justin Cooper, a spokesman for Capita As­set Ser­vices, 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. 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.

“The rel­a­tive strength of the UK con­sumer, un­til re­cently at least, and surg­ing eco­nomic growth abroad has sup­ported stronger div­i­dend growth than we have seen in some time. Even though the sec­ond half is go­ing to be much qui­eter, in­vestors can look for­ward to div­i­dends hit­ting a new record this year.”

Div­i­dends paid by pub­licly listed com­pa­nies are cru­cial to ma­jor in­vestors such as pen­sion funds, which need con­tin­u­ous streams of in­come, as well as ris­ing share prices, in or­der to fund re­tire­ment schemes.

How­ever, there is ten­sion within busi- nesses to en­sure they bal­ance the amounts they pay out to share­hold­ers in the short term with money in­vested in growth to pro­duce con­sis­tent re­turns.

Boards have also come un­der fire from con­sumer groups for hoard­ing cash that could be used to cut prices. In a re­port this month, Cit­i­zens Ad­vice ac­cused power net­work own­ers such as Na­tional Grid of mak­ing £7.5bn in “un­jus­ti­fied” prof­its over the last eight years, much of which was passed on to share­hold­ers.

Capita said spe­cial pay­outs of £4.6bn were the sec­ond high­est on record for any quar­ter, ow­ing mainly to a £3.2bn pay­ment from Na­tional Grid on the sale of its 61% stake in its UK gas dis­tri­bu­tion busi­ness. Mean­while, Lloyds Bank­ing Group paid a £357m spe­cial div­i­dend on top of a £1.2bn reg­u­lar one.

In the resur­gent min­ing in­dus­try, ev­ery com­pany raised div­i­dends, with Glen­core and Rio Tinto par­tic­u­larly gen­er­ous. In the con­sumer goods and house­builder sec­tor, ev­ery com­pany also in­creased pay­outs, the study says.

The Capita re­search ex­am­ines div­i­dends paid on the or­di­nary shares of com­pa­nies listed on the Lon­don Stock Ex­change’s list­ing of its most es­tab­lished com­pa­nies. It ex­cludes in­vest­ment com­pa­nies whose div­i­dends rely on in­come from equities and bonds.

‘Share­hold­ers had punchy spe­cial div­i­dends and the weak pound in their cor­ner’ Justin Cooper, Capita

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