Dividend payouts on course for record but squeeze on profits slows pace of growth

Dividends paid to shareholders by British companies reached an all-time high during the last quarter and are still on track to hit a new peak for the year.

Between April and June companies paid out £25.3bn, according to the share registrar Capita’s Dividend Monitor. Of the firms surveyed, 198 commenced or reinstated dividends, compared to 33 who cut or cancelled them.

Some analysts say bigger cash returns are a sign of a recovering economy, but the opposite view is that companies are still being too conservative with their cash by handing it back to shareholders instead of investing to expand.

The forecast £81.4bn for the year is £800m more than last year’s total.

Special dividends in the quarter were stronger than Capita had expected, reaching £1.2bn, thanks in particular to the copper miner Antofagasta, insurer Standard Life and ITV. After one-off special dividends, among the strongest sectors were media, financial services and food producers.

But it wasn’t all good news. Retailers saw dividends fall 2 per cent as tough times continued on the high street, and non-life insurers cut payouts 20 per cent on a like-for-like basis after More Thank owner RSA’s big cut.

Life insurers managed underlying growth of 3 per cent, despite Aviva’s shock dividend cut.

Justin Cooper, chief executive of Capita Registrars, said this was “part of a wider picture that is seeing the pace of dividend growth slow down, following a profit squeeze on UK firms. Dividends are not falling, they are merely growing more slowly, but slow enough for us to further trim our underlying forecast for the year.”