Investors are enjoying a stellar 2017, with rising share prices being supplemented by record-breaking dividend payments, new research shows.
Shareholders in companies listed on London’s main market received £33.3bn in payments during the second quarter of this year, up 14.5% year on year, according to the latest analysis by Capita, a services company.
The growth, which has come on top of rising share indices during 2017, is attributed to high special dividends and large gains because of movements in foreign exchange rates. After stripping out one off payments via special dividends, underlying receipts to shareholders rose by 12.6%.
Justin Cooper, a spokesman for Capita Asset Services, said: “Shareholders can be thankful they had punchy special dividends and the weak pound in their corner, but improving profits have also played their part. Exchange rate gains have come not only for big multinationals declaring dividends in foreign currencies, but also for others with overseas operations, or export sales, supercharging their profits and so their dividends.
“The relative strength of the UK consumer, until recently at least, and surging economic growth abroad has supported stronger dividend growth than we have seen in some time. Even though the second half is going to be much quieter, investors can look forward to dividends hitting a new record this year”.
Dividends are received by owners of shares in companies. The payments by publicly listed companies are crucial to major investors such as pension funds, which need continuous streams of income, as well as rising share prices, in order to fund retirement schemes.
However, there is a constant tension within businesses to ensure they balance the amounts they pay out to shareholders in the short term, with money invested in their companies in order to grow them over a longer period and produce consistent returns.
Capita said that special payouts of £4.6bn were the second-highest on record for any quarter, owing mainly to a £3.2bn payment from National Grid on the sale of its 61% stake in its UK gas distribution business.
Meanwhile, Lloyds Banking Group, paid £357m as a special dividend, on top of a £1.2bn regular dividend.
Dividend growth was also strong in the resurgent mining industry, where every company raised payouts and Glencore and Rio Tinto made particularly large payouts for the sector. In the consumer goods and housebuilder groups, every company also increased its payout, the study said.
The Capita research examines dividends paid out on the ordinary shares of companies listed on the UK main market, the London stock exchange’s listing of its most established companies.
The research excludes investment companies such as listed investment trusts whose dividends rely on income from equities and bonds.
