UK share dividends hit record high

UK dividends rose by 18.4% in the second quarter to a record high of £22.6 billion, surpassing the previous peak in the same period back in the pre-crisis days of 2007, and they are expected to continue rising.

During the first half of the year, total dividend payments reached £41.1 billion, up 21.3% on 2011 and way ahead of the previous half year record of £34.6 billion seen in 2008, according to data from Capita Registrars.

The group has now upgraded its full-year forecast to £78.3 billion in total dividends, which would equate to a year-on-year rise of 15.1%. It then expects this to rise to between £79 billion to £81 billion in 2013.

One-off payments

The dramatic rise in the second quarter is, though, somewhat skewed by a number of special one-off payments, including the £1 billion special dividend Old Mutual (OML.L) paid out after its disposal of its Scandinavian interests on top of its £201 million final dividend.

GlaxoSmithKline (GSK.L) also paid out a £277 million special dividend following the sale of its US over-the-counter medicine business, and Antofagasta (ANTO.L) made a £149 million special payment. Savills (SVS.L), Fidessa (FDSA.L) and Copthorne Hotels (MLC.L) also made one-off payments.

‘For the first half, special dividends totalled an enormous £5.9 billion, almost 2.5 times as much as the £2.3 billion paid in the first half of 2011,’ said Mark Baker, head of research at Capita Registrars.

‘In fact, in the first half of 2012, the total special dividends paid out exceeded the combined annual totals of the four years 2008-2011.’
Combined, they added 5.4% to the quarter’s headline growth rate. But underlying dividends still rose by 14.5% when this is stripped out, way ahead of Capita Registrar’s expectations. The firm had predicted a sluggish year for dividend growth back in January.

Instead, dividends have proved resilient pretty much across the board, with 250 companies paying one in the second quarter, up from 247 in the same period last year. Of these, 212 increased, started or reinstated their dividend compared with 34 that cut or stopped their payouts and 12 that maintained them at the same level. The ratio of risers to fallers was a very robust 6.21 to one.

Familiar faces

While this is in the main good news for investors, one potential concern is the increase in the concentration of the big payers. The five biggest payers accounted for 36% of total dividends in the first half of the year, up from 33% in the same period last year.

Between them they paid out £15.1 billion, up from £11.2 billion last year, with Vodafone (VOD.L) the single largest contributor. Royal Dutch Shell (RDSb.L), HSBC (HSBA.L), GlaxoSmithKline (GSK.L) and Cairn Energy (CNE.L) made up the top five with the last of these a first-time entrant to the big league.

‘Cairn makes a cameo appearance in the top five thanks to its £2.2 billion special payout in the first quarter, but we expect BP to return to the top five by the time the third quarter payments are counted,’ Baker said.

‘The top 15 stocks paid out almost two thirds of all dividends, demonstrating the perennial massive dependence UK investors have on very, very few shares for all their income.

‘The tail is very long indeed. The next 85 companies making up the FTSE 100 only contribute another 27% of all dividends (91% for the FTSE 100 overall in H1). The FTSE 250 accounted for just 8% in the first half.’

Overall, the top 15 accounted for 64% of total dividends paying out £26.3 billion.

Top 15 dividend paying companies in the FTSE 100: H112

Source: Capita Registrars UK Dividend Monitor