BP crisis will trigger £10bn slide in 2010 dividend payouts

Total dividend payouts are expected to fall by some £10 billion in 2010 as income seekers feel the pain of the BP crisis.  

According to the latest Capita Registrars Dividend Monitor, which each year analyses data on every UK company payout, FTSE 250 firms have increased dividend payouts by 24% in the first half of the year.

While this rise of nearly a quarter is far faster than payout by FTSE 100 companies, the increased dividends will collectively fail to match BP’s axed payout. This is highlighted by the fact that without Shell and BP, FTSE 100 dividends would have fallen by 17% last year.

It pointed out that even though the FTSE 250 is growing its dividends quickly, the index contributes to only one twelfth of the total UK dividend pot.

Capita expects shareholders to receive £54.7 billion from British firms over the course of 2010, down 6.5% from 2009. 

Analysts say this represents a 19% plunge in payouts when compared with dividend levels recorded in 2008, but believe some positivity can be found in the UK’s underlying economic picture.

Paul Taylor, head of dividends at the research group, said Capita’s findings point towards another tough year for income investors, largely due to one company cancelling its payouts.

‘Dividends are set to fall again, while yields on cash and bonds remain very low,’ Taylor said.  ‘The huge concentration of the UK market into a few big stocks has made investors uncomfortably reliant on very few sources for the bulk of their income.

‘The top 15 paid two thirds of all dividends in the first half, so investors are, as we have witnessed, vulnerable to a one-off shock from any of these big companies.’

The FTSE’s leading 250 companies paid out dividends totalling £5.3 billion in 2010, however this is far less than the dividends struck off by petroleum giant BP, more than £5.4 billion for nine months.