Dividend payments in the UK reached a new record in the third quarter of 2015, according to Capita Asset Services.
More than £27 billion was paid out in dividends to shareholders in the UK during the quarter, more than in any other third quarter on record.
With the pound 8% lower than the dollar in the third quarter, investors enjoyed £600m windfall, as many of the UK’s largest companies declare dividends in US dollars.
Capita’s forecast for 2015 is unchanged at £87.2bn, owing to strong Q3 special dividends. Underlying dividends (which exclude special payouts) will now reach £84.6bn, £200m less than previously forecast, mainly because Standard Chartered has halved its interim dividend.
Capita’s revised forecast represents a 6.8% rise, the fastest increase since 2012, and a new record for the underlying total.
The outlook for 2016 is less rosy. With £2bn of cuts from Glencore and Standard Chartered alone, and risks of more cuts to come from commodity firms in particular, growth will be much slower. Capita’s preliminary 2016 forecast is £89.8bn, an increase of just 3.0% year on year.
Justin Cooper, Chief Executive of Shareholder solutions, part of Capita Asset Services said: “Income investors have had terrific dividend payouts in 2015 so far, shrugging off some high profile casualties like Tesco. But the outlook is gloomier. Profits are lower relative to dividends than at any time since 2009, and we have seen some of Britain’s biggest dividend payers announce drastic cuts for the year to come, with the prospect of more to follow.
"Companies tend only to cut their dividend in extreme circumstances, either if their profitability is permanently lower, or balance sheets are under pressure, so we still expect growth overall next year. The top 100 in particular is struggling to make any headway. Income investors can take comfort in the fact that equities continue to offer a very attractive yield compared to other asset classes, but with risks abounding, they should ensure they keep their portfolios well diversified.”
