Investors enjoy record fourth quarter for UK dividends

UK dividends last year experienced what was 'comfortably' a record fourth quarter, lifted by the downturn in sterling and special dividends more than doubling, according to new data.

Capita Asset Services said 2016 proved to be a 'golden year' for shareholder payouts. Picture: Bruno Vincent/Getty Images

The latest monitoring of the ­sector by Capita Asset Services, the shareholder-services arm of outsourcing group Capita, found an 11.7 per cent year-on-year jump in headline dividends to £16.6 billion.

This led to the annual headline total coming in at £84.7bn, up 6.6 per cent from 2015, with the weak pound accounting for £4.8bn of the £5.2bn gain. At an underlying level, ­dividends climbed 2.6 per cent to £78.5bn, as firms struggled to boost profitability.

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Justin Cooper, chief executive of shareholder solutions, part of Capita Asset Services, said 2016 started “pessimistically”, hit by high-profile cuts.

Nonetheless, “the second-largest haul of special dividends on record, with the added alchemy of huge exchange-rate gains following the pound’s devaluation in the summer, ultimately turned a rather leaden year golden”.

For 2017, the Capita unit expects underlying dividends to rise to £84.4bn, a “healthy” year-on-year jump of 7.5 per cent, still benefiting from the weaker pound. Headline ­dividends are forecast to grow 3.3 per cent to £87.5bn.

Cooper said some factors give cause for optimism this year, but “investors will also be looking for improving profitability from companies, and for this to feed through into underlying dividends, so that improving payouts are more sustainable and less dependent on currency gains”.