UK dividends to rise 11% in 2012 - Capita

UK dividends are set to rise by 11% to £75bn this year, after reaching record highs in 2011.

Payouts from UK-listed companies hit a new record of £67.8bn in 2011, according to the latest Dividend Monitor from Capita Registrars, which analyses data provided by Exchange Data International.

Total gross dividends rose 19.4% for the full year, and soared 26% in Q4 alone compared to the same period in 2010. This was the first annual increase since 2008.

Capita said the surge reflects broad based growth across almost all sectors, but was also impacted by a number of factors.

Firstly, BP paid out £1.8bn more in 2011 than in 2010 as it restored dividends following its oil spill. Secondly, there was an exceptionally large value of special dividends paid in 2011. Excluding these two factors, underlying dividend growth in the year was 12.8%.

Special dividends reached £2.9bn last year, increasing fourfold, or £2.2bn more than 2010. They were boosted by the £1.6bn payment from International Power, and £600m from Antofagasta, among others.

Around 19 companies paid special dividends in 2011, compared to 13 in 2010 and just nine in 2009.

A total of 438 companies paid a dividend in 2011, only slightly more than the 434 in 2010. But, 373 increased, started or reinstated dividends compared to only 90 who cut or cancelled them.

For 2012, Capita forecasts a further 11% increase in dividends to £75bn boosted by more special payouts.

Vodafone is likely to seize Shell's position as the UK's top payer in 2012, contributing almost one tenth of all dividends. It will pay £2bn at the beginning of February owing to income received from its holding in Verizon Wireless.

However, after adjusting for inflation, in real terms dividends will need to top £77bn to beat 2008's total which is unlikely until 2013, according to Capita.

The prospective gross yield for 2012 is 4.4%, with the FTSE 100 yielding 4.5% and the FTSE 250 on 3.7%. Bond yields fell further still in Q4, taking equity yields to an unprecedented spread over bonds of 240bps.

Charles Cryer, Capita Registrars' CEO, said: "Record dividends are providing a real bright spot for investors against a very gloomy backdrop of crisis in the eurozone and a stalling economic recovery in the UK. We are optimistic dividends will make further progress in 2012, unless the eurozone sinks deeper towards collapse and leads companies to retrench at home.

"Expanding dividends mean the yield on equities looks remarkably attractive at present, although there are clearly risks to capital in holding shares, as with many other comparable asset classes."