Underlying dividends at record high in the UK
DIVIDENDS in the UK reached £87.6billion last year, with underlying dividends at a record high, according to a report.
Underlying dividends hit a UK record of £84.6billion in 2015
Underlying dividends – excluding specials – hit a UK record of £84.6billion in 2015, up 6.8 per cent year-on-year, the latest UK Dividend Monitor from Capita Asset Services found.
The total figure for UK dividends was 10 per cent lower than 2014, but only because figures for that year were flattered by Vodafone’s record special dividend on the sale of Verizon Wireless.
The strongest dividend growth was seen in companies exposed to the UK consumer market, with house builders such as Barratt Developments and retailers such as Next seeing a healthy rise in payouts.
The FTSE250 outperformed the London blue chip index
Not all companies face a bleak 2016
Dividends also grew strongly in the financial services sector.
The FTSE250 outperformed the London blue chip index when it came to dividend growth last year.
FTSE250 dividends experienced the fastest growth since 2011, up 22.6 per cent to £10.2billion.
By contrast, FTSE100 companies saw dividend payouts fall 13.7 per cent to £75.7billion, though the Vodafone dividend in 2014 skewed comparative figures.
FTSE250 dividends experienced the fastest growth since 2011
Excluding sharply lower special dividends, FTSE100 dividend payouts increased 5.5 per cent to £73.9billion, compared with the FTSE250’s much stronger underlying 15.3 per cent rise.
However, the picture wasn’t entirely positive, with many large companies – such as Centrica and Standard Chartered – forced to cut dividends.
The outlook for the coming year is more bleak, with the full effect of falling oil and commodity prices set to be felt, particularly in the mining sector.
This year could see the first decline in underlying dividends since 2010, with many companies predicted to reduce payouts.
This year could see the first decline in underlying dividends since 2010
According to Capita Asset Services, headline dividends could drop 1.3 per cent to £86.5billion, while underlying dividends are forecast to fall 0.9 per cent to £83.8billion.
Justin Cooper, chief executive of Shareholder solutions, part of Capita Asset Services, said: “The sheen of a strong 2015 has been tarnished by the unpleasant prospects for 2016. The high yields of some of the UK’s largest companies reflect scepticism around the sustainability of their payouts.
“Our forecast accounts for £3.4billion of cuts that have already been announced, but at least an additional £2.1billion could be at risk.
“But this is not to say that all companies face a bleak 2016. A few very large dividend-payers are skewing the picture. We still expect strong dividend growth to come through from companies better insulated from negative global trends, with mid-caps likely once again to outperform the top 100. Choosy investors can still find the gems in the rough.”