UK investors on course for record year of dividends

UK dividends are on course for a record year as a series of one-off windfalls and the fall in the value of sterling increased Capita’s 12-month forecast by 7% to an all-time high of £90.6 billion.

Capita Asset Service’s quarterly Dividend Monitor upped its full-year prediction following a bumper £33.3 billion paid out in the second quarter, 15% higher than the same period of 2016.

Even stripping out the step-change fall in the value of the pound since last year’s Brexit vote, the underlying rate of growth still stood at 8%, the fastest appreciation in two years.

That was fuelled by underlying growth, in addition to £4.6 billion in special dividends – the majority of which was the one time payout of £3.2 billion by National Grid (NG) following the sale of its UK distribution network.

Lloyds Banking Group (LLOY) additionally paid out £357 million in a special payment in addition to its scheduled £1.2 billion dividend. Those helped take the sting from the removal of a scheduled dividend from Sky (SKYB) as it awaits clearance of its purchase by parent group Fox.

‘The gloves came off in the second quarter, as UK plc limbered up to deliver a knockout year in dividends,’ said Capita’s chief executive for shareholder solutions Justin Cooper.  

‘Shareholders can be thankful they had punchy special dividends and the weak pound in their corner, but improving profits have also played their part.’

A total of 20 companies paid out special dividends in the period, a record number.