Financial sector strength leads increase in payments
Improving financial performance pushed UK dividend payments to their highest level since before the financial crisis of 2008 – particularly those paid out by banks.
Underlying dividend payments totaled £28.3 bn ($44 bn) in the second quarter of this year, an increase of 9.7 percent from the same period last year, according to data given to the Financial Times by Capita Asset Services. That’s the highest level since the asset manager began monitoring the data in 2007. When special dividends are included, second-quarter payouts totaled £29.2 bn.
‘To say income investors had a bumper month is an understatement,’ John Cooper, CEO of Shareholder Solutions, which is a part of Capita Asset Services, told the FT. ‘The lion’s share of growth is coming through regular dividends, rather than one-off specials, as the UK’s largest companies benefit from improved currency conditions, while mid-caps continue to tap into strong domestic economic growth.’
Dividend payments in the second quarter of 2014 totaled £25.8 bn, according to an earlier Capita Asset Services report. The firm said then that payouts increased only 1.2 percent on an annual basis due to slow corporate earnings growth and currency exchange. This year, earnings growth and currency exchange have swung the other way, particularly in the financial sector.
The financial sector increased dividend payouts by an average of 25 percent in the second quarter of this year from the same period last year, the firm says. Lloyds led the increase, with a dividend payout of £595 mn, its first payment since 2008, while HSBC was overall the largest dividend payer in the quarter.
Capita predicts underlying dividend payments for the full year of 2015 will rise 7.2 percent compared with 2014 as growth slows in the second half.
