Record results bring in big dividends

Bank holiday rush to reveal rising payments to investors, offsetting income loss at banks and BP
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The Independent Online

Inflation-beating increases in shareholder dividends are expected to be announced this week after strong figures were reported by the record number of companies revealing results before the bank holiday.

The higher payments to investors will offset the loss of income from troubled oil giant BP and banks forced to suspend dividends.

Companies reporting this week include financial adviser Hargreaves Lansdown, the Go-Ahead transport business, and Garfunkel's owner, The Restaurant Group. DSG International, the former Dixons retailing chain, will also update the market on its trading.

Of more than 100 firms reporting last week, most increased dividends and only four reduced their payments – even though a third of the businesses announced poorer profits than on the same time last year. Housebuilder Persimmon made a 3p interim payment after scrapping its dividend in 2008. FTSE-100 mining group Kazakhmys resumed half-year payments.

Most of the firms increasing dividends proposed payments that far exceed inflation. Drinks group Diageo is raising its interim payment by 9.3 per cent, engineering group IMI announced a 12.5 per cent rise, and ad agency WPP an extra 15 per cent. Investors in FTSE-100 insurance group Admiral will get a 17.7 per cent boost.

Including a 1p special dividend, pawnbroker H&T is paying 40 per cent more than last year, while Robinson, the packaging firm, and energy group Aggreko are upping payments by 50 per cent.

The strength of dividend payments will be reflected in firms reporting this week too. The City eagerly awaits results from cleaner Johnson Group Services, recruitment giant Hays and household-products maker McBride. Analysts at stockbroker Charles Stanley expect distribution group Bunzl to increase its dividend from 6.65p to 7p.

Pressure on companies to report results within two months of their accounting period ending led to the record number of announcements just before the bank holiday. Many interim results finish at 30 June.

Executives were forced to cut short their August holidays and financial public relations firms found themselves stretched. One leading City spin doctor said: "It's crazy. I miss the days when people didn't have to report in August."

The results have given City analysts a broad picture showing companies generally confident about the future and willing to dip into strong cash reserves to reward investors. A third of firms reported lower profits, but there were dividend cuts from just a handful, including investment group F&C Management, publisher Haynes and steel group Severfield-Rowen. Energy services giant Wood Group raised its payment by nearly 10 per cent despite reporting half-year profits down from £161m to £123m. Building materials company CRH maintained its dividend even though profits fell by 77 per cent.

Despite the dividend payments, the FTSE 100 dipped to a seven-week low on Wednesday. Markets were hit by depressing data from the US, but the market rallied to close at over 5200 on Friday, about where it started the week.