Similar to the times article the other day. This was on III today
Despite severe market turbulence this summer, UK companies have managed to reward shareholders with massive dividends worth more than £20 billion, the highest amount since the second quarter of 2008.
Dividends rose 16% in the third quarter of this year (July to September), compared to the same three months in 2010.
According to Capita's Dividend Monitor, the £55 billion distributed to shareholders for the first nine months of this year only just fell short of the total payout for the whole of 2010. A staggering 196 cash-rich firms upped their dividends in July to September, while only 23 cut or cancelled them.
Charles Cryer, Capita Registrars' chief executive officer, says: "Dividends are growing faster than we expected as UK firms shrug off the worst stockmarket conditions since 2008 and continue to increase payouts to shareholders. In real terms they still have some way to go to top previous highs, but investors will be grateful that at least one asset class is providing a solid, inflation-proof income."
The Capita research shows that the yield on UK equities is 3.8%, as share prices tumble and dividends rise. "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," says Cryer.
For the first time since the end of 2009, the FTSE 100 exceeded the dividend growth of the medium-sized companies in the FTSE 250. Dividends from FTSE 100 firms grew 17%, almost twice the 9% from the FTSE 250.
Almost all stockmarket sectors grew their payouts, but unsurprisingly the mining companies, with fat profits and on the back of booming commodity prices, accounted for the most growth, adding £445 million to last year's total. All the mining companies increased or held their dividends, but the biggest effect came from newcomer Glencore, whose debut dividend boosted the sector by £224 million, and contributed 1.2 percentage points to the 15.9% growth rate.
The strong growth in dividends in the third quarter has led Capita to increase its forecast for 2011 by £1 billion to £67 billion, making the highest annual total since 2008.
"The jury is out on whether dividends can sustain this momentum next year," comments Cryer. "Capita still expects dividends to grow, but the headline rate is likely to be somewhat slower. Investors can at least take comfort 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."
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