UK dividend payouts to rise 18% this year

UK firms will see their dividend payouts hit £67bn this year, an 18% rise on 2010, according to the latest Dividend Monitor from Capita Registrars.

This is the highest annual total since 2008, driven by strong dividend growth in the third quarter.

For the first time since Capita began its research, all sectors increased their dividends in Q3, excluding distorting factors, but cyclicals outperformed defensive sectors.

Large caps overtook mid caps in the payout stakes for the first time since 2009, with FTSE 100 dividends up 17% compared to 9% from the FTSE 250.

Some 228 companies paid dividends from July to September, up from 201 in Q3 2010, boosting the ratio of those reinstating or increasing payments compared to  those cutting or cancelling to 8.5:1.

Charles Cryer, Capita Registrars’ CEO said: “Dividends are growing faster than we expected as UK firms shrug off the worst stock market conditions since 2008 and increase payouts to shareholders, although in real terms they still have some way to go to top previous highs.”

Total UK dividends increased by 15.9% or £2.9bn year-on-year in Q3.

Special dividend payments from Hargreaves Lansdown and Moneysupermarket flattered the headline figure, adding £76m.

The report found a steep rise in yields to 3.8% has made equities a more valuable source of income than bonds, which have seen yields fall from 3.2% in July to 2.3% in September.

Despite the uncertain economic environment, Capita has upped its full-year forecast from £66bn to £67bn for 2011, but warned special dividends have created a relatively high base for 2012.

“Even allowing for a relatively optimistic headline 10% growth next year, dividends in real terms will fail to surpass the previous peaks until 2013.”