Investors hit ‘knockout year’ with £33.3bn in dividends

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17 Jul, 2017

Investors hit ‘knockout year’ with £33.3bn in dividends

Investors are set to enjoy a “knockout year” after dividends hit an all-time high of £33.3bn in the second quarter, thanks to an upsurge from the Brexit-hit pound.

This represents a rise of 14.5% year on year in headline terms, the quickest in more than three years, according to Capita Asset Services.

Sterling’s devaluation since last year’s EU referendum has seen a substantial boost to dividends, as it means firms with overseas earnings enjoy a currency boost when converting them back into pounds.

Other than the weak pound, high special dividends and robust budding enterprise also lifted overall growth, the report explained. The strong quarter has led Capita Asset Services to update its 2017 predictions for headline dividends to a record £90.6billion, up 7% year on year.

Chief executive of Shareholder Solution, Justin Cooper – part of Capita Asset Services, said: “The gloves came off in the second quarter, as UK plc limbered up to deliver a knockout year in dividends.”

He showed how much of these gains came from large foreign exchange gains, with the weak pound adding £1.2billion.

“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,” he said.

However, even on a constant currency basis, underlying growth was still impressive at 7.8%, the fastest increase in two years, thanks to a large return of special dividends and rising profits.

In fact, special payouts of £4.6billion were the second-highest on record for any quarter. This was partly driven by a very large payment from National Grid, which accounted for three quarters of the headline growth rate.

“Shareholders can be thankful they had punchy special dividends and the weak pound in their corner, but improving profits have also played their part,” Mr Cooper added.

Growth was especially strong in the resurgent mining sector, while consumer goods and housebuilders also performed well, with every company increasing its payout. However, the report warned that the second half of the year is likely to show weaker growth than the first half.

Still, Mr Cooper said that investors can still look forward to dividends hitting a new record this year, with dividends of £90.6billion, obliterating the previous record set in 2014.

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