According to the latest Dividend Monitor from Capita Asset Services, headline dividends totalled £29.2bn between April and June, the highest second quarter payout on record and an annual increase of 13.2%.

At an underlying level, stripping out special dividends, the total payout hit £28.3bn – the highest for any quarter on record and a 12.7% year-on-year increase.

While currency effects continued to buoy payouts – reversing the trends seen in 2014 – the financial sector was the biggest contributor to dividend growth. Dividends in the sector grew by 33.3% on a headline basis, contributing more than one third of the quarter’s total.

Lloyds Bank, which issued its first dividend since 2008, paid out £595m to investors, while HSBC saw its total dividend increase by 21% to £2.9bn.

Consumer goods industries also posted a strong quarter, with 11.7% headline growth, though flattered somewhat by Imperial Tobacco’s decision to switch to quarterly payouts.

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Mid-caps continued to demonstrate breakneck growth compared the FTSE 100, benefitting most strongly from rapid domestic economic growth. Dividends climbed 26.1% to £3.8bn on a headline level. This is the fastest rate of growth in any quarter since 2010, and the fifth consecutive quarter they have reported accelerating growth.

Full year forecast raised

Following the improving trend of growth, Capita Asset Services has raised its forecast for full year dividends by £600m to £87.2bn.

The firm believes that underlying dividends (which exclude special payouts) will now reach £84.8bn. This represents a 7.3% year-on-year rise, the fastest increase since 2012, and a new record for the underlying total.

Justin Cooper, chief executive of Shareholder solutions, part of Capita Asset Services said:  “The outlook has been improving, but it’s not all plain sailing. The continuing Greek crisis has the potential to hamper companies more exposed to the eurozone, while the pressure on the supermarket sector will be felt more keenly next quarter, with Tesco and Sainsbury to pay out £1bn less to investors.

“The changes announced in the Budget also give pause for thought next year, bringing benefit to many small-scale investors, yet impacting higher rate tax payers and those with larger portfolios. This could well impact companies’ dividend policies in the future.”

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