Shareholders receive a £33bn dividend bonanza
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