UK dividends hit record level in third quarter

City Editor

Monday 22 October 2012

INVESTORS received the largest-ever dividend pay-out from UK companies in the third quarter of 2012 as the lacklustre economy deterred firms from investing in their own operations.

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TIM SHARP CITY EDITOR

In all, £23.2 billion was handed to shareholders in the three months to the end of September, 10.4% up on the year before, according to shareholder services firm Capita.

This was the seventh consecutive quarter of dividend growth.

For the first nine months of the year, the total pay-out reached £64.6bn, an increase of 17.1%. This is more than for the full years 2007, 2009 and 2010.Capita said in its latest UK Dividend Monitor: "It is clear there will be no return to rapid economic growth in the next couple of years, while the private sector and the public sector struggle to reduce their borrowing levels and while the banking system is hobbled by the need to bolster its capital ratios."Against this backdrop dividends continue to grow. Firms are enjoying healthy free cash flows, and are not investing in new capacity without robust demand to justify the spending."Despite the size of the payout, 10.4% was the slowest quarterly growth rate since the final quarter of 2010 because there were fewer special dividends paid out than in previous periods.Capita has increased its headline forecast for 2012 as a whole by £300m to a new record of £78.6bn.Charles Cryer, chief executive of Capita Shareholder Services said: "The volume of cash being distributed by UK companies is unprecedented. The total for 2012 will be almost one sixth higher than last year's record £68bn."But he warned that after a prolonged period of rapid growth, pay-outs are slowing.FTSE 100 dividends rose 11.1% in the third quarter to £21bn, down on the 22.9% increase in the first half of 2012. Pay-outs from the FTSE 250 dividends grew 6.2% to £1.9bn.Capita has predicted a £81bn pay-out for 2013, which is likely to be just 3% ahead of 2012, although it said special dividends could inflate this total."Even in the event of difficulty maintaining profits, firms will be keen to maintain dividend payments where they can, as not to do so sends a very negative signal to investors," it said in its report:

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UK dividends hit record level in third quarter

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