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UK dividends hit record £33bn in Q2 of 2017

Paloma Kubiak
Written By:
Paloma Kubiak

It’s set to be a knockout year for investors as dividends hit an all-time record of £33.3bn in the second quarter of 2017.

Headline dividends climbed 14.5% year-on-year in the second quarter of 2017, according to the latest UK Dividend Monitor from Capita Asset Services.

This was the fastest rate of growth in over three years, boosted by robust underlying growth, the weak pound and a large haul of special dividends.

Capita reported that special payouts of £4.6bn were the second-highest on record for any quarter. National Grid paid its shareholders an extra £3.2bn on the sale of its 61% stake in its UK gas distribution business and more money is expected to come to shareholders via its share buy-back.

Lloyds Bank also paid £357m extra on top of its regular dividend of £1.2bn. A total of 20 companies paid specials, again the second highest number in any quarter on record.

Underlying dividends, which exclude special payments, rose by 12.6% over the year, buoyed by weak sterling. They reached £28.6bn in Q2 2017 to a total £84.4bn with the dollar/euro exchange rate adding £1.2bn to the quarter. Excluding exchange rate gains, underlying growth was 7.8%, the fastest increase in two years.

Justin Cooper, chief executive of Shareholder solutions, part of Capita Asset Services said: “The gloves came off in the second quarter, as UK plc limbered up to deliver a knockout year in dividends.

“Shareholders can be thankful they had punchy special dividends and the weak pound in their corner, but improving profits have also played their part. The relative strength of the UK consumer, until recently at least, and surging economic growth abroad has supported stronger dividend growth than we have seen in some time. Even though the second half is going to be much quieter, investors can look forward to dividends hitting a new record this year.”

Sector performance

Every company in the mining sector raised payouts, though Glencore and Rio Tinto made large contributions to growth. Consumer goods and housebuilders also increased payouts. Financial companies also grew their dividends, but more slowly than the average.

Capita has upgraded its dividend forecast. While it envisages a much quieter second half, it expects 2017 headline dividends of £90.6bn, an increase of 7% year-on-year, smashing the previous 2014 record.

Turning to underlying growth, it cites 7.4%, bringing dividends to a record £84.4bn, a £200m decrease on its previous forecast. This is due to the removal of Sky’s final dividend following its acquisition by Fox. On a constant-currency basis, that means underlying growth of 4.3%.