Investors receive a boost as payouts soar to £15bn
Payouts by UK companies soared to £15bn in the first three months of the year, rising by 10.3 per cent compared to the first quarter of 2010. It was the fastest quarterly growth rate since the third quarter of 2008.
Dividends rose by £1.4bn, with the overall figures receiving a boost from a big 92p-per-share payout from International Power, according to data from Capita Registrars.
Troubled BP, which suspended its dividend payments in the wake of the devastating Gulf of Mexico oil spill last year, finally began to make payouts to shareholders again but it was just £900m, half the previous level. But that was enough to make the oil giant the seventh-largest payer in the quarter and it will return to the top five for the year, Capita said.
As a result, the share registrar said it had increased its full-year forecast to £64.2bn, equivalent to a jump of 7.9 per cent in 2011. The rise indicates increased confidence in the economy, according to Capita Registrars chief executive Charles Cryer.
"Even though there are still uncertainties in the wider economy, the dividend recovery is very broadly based, indicating companies are much more confident in their financial position. Smaller firms are much more sensitive to swings in the economic cycle, so the dramatic rise in payouts from them is a further sign of optimism," Mr Cryer said
Based on its forecasts, Capita predicts that the prospective yield from the FTSE 100 will be 3.3 per cent for the full year, while the FTSE 250 will yield 2.7 per cent. In terms of companies, Capita said the pharmaceuticals group AstraZeneca yields six per cent, slightly more than sector peer GlaxoSmithKline. Telecoms group Vodafone yields 5.4 per cent, ahead of Royal Dutch Shell at five per cent.
The strong results in the first quarter of 2011 were despite several companies bringing forward dividend payments to beat the 50p tax rate. A total of 156 firms paid a dividend in the first quarter, with 126 paying increased or reinstated dividends. Only 40 firms cut or cancelled their dividends.
In terms of cash, Capita said the banking sector made the biggest increase in distributions, with an additional £249m compared to the first quarter of 2010.
"2011 has got off to a very strong start, and underlying dividend growth will accelerate from here," said Mr Cryer. "Income investors are set to enjoy the best year since 2008, with an extra £7.7bn flowing from UK companies into their pockets," he added.
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