An article appeared in the times today entitled 'Rising Dividends put a wry smile on investors faces'
Below is a summary.
Basically, it states that whilst the markets are in turmoil, the pain is being tempered somewhat by companies paying out ever higher dividends to investors.
In fact according to latest data from Capita Registrars, dividends are up by 15.9% in the third quarter beating £20 billion for the first time since the second quarter of 2008. Capita has increased it's full year forcast for dividend payouts by 1 billion to £67 billion, an increase of £10.6 billion over last year representing a mighty 18% increase year on year.
Even accouting for the return of BP to the dividend lists, Capita still estimates year on year growth of 11%. Payouts made by FTSE 100 index companies increased by 17% in the three month period, almost twice the 9% recorded by FTSE 250 stocks. (that is why our investment tools have focussed on the FTSE 100 with a handful of big payers from the FTSE 250)
For the first time since capita started monitoring payouts, all sectors increased their dividends.
Overall 228 companies paid a dividend in the third quarter. Of these 196 increased, re-instated or started paying dividends. Only 23 cancelled or cut their dividend.
The prospective equity yield for 2011 is 3.8%. The FTSE 100 will yield 3.8% this year, contributing 88% of the annual total. The FTSE 250 is yielding 3.5%. With bond yields plunging 1.1%, the gap between equity and 10 year bond yields is now an unprecedented 140 basis points.
Capita's chief executive is quoted as saying "A yield this high relative to bonds is very rare indeed, but risks to capital are great and the market may be judging that earnings and therefore dividends, are vulnerable to a renewed economic slowdown. The jury is out on whether dividends can sustain this momentum next year. Still expect dividends to grow, but the headline rate is likely to be somewhat slower"
He added "Investors can at least take comfort in the knowledge that firms are well capitalised, more so than at the time of the last major financial crisis, and are better able to withstand renewed turmoil"
