UK dividend payouts reached £14.2 billion (€17.9 billion) in the first quarter, a 6.4% increase year-on-year – though the forecast for dividends is for them to fall this year..
The year-on-year growth was largely due to special dividends and so it masked underlying weakness, according to research by professional services firm Capita.
When “supercharged” special dividends payments by the likes of Mediclinic, Johnson Matthey, Next, Beazley and others are stripped out, growth was just 1.3%, which itself was boosted by £350 million due to weakening sterling. This is the slowest rate of increase in a year.
Capita said even this slow growth was unlikely to last as companies announce a further £2.7 billion of dividend cuts during Q1. Capita added that these cuts will bite later in the year, adding to the £3.4 billion of cuts that had previously been announced.
For the full year, Capita has reduced its forecast for underlying dividends by £200 million to £75 billion, a decline of 1.7%, and the first fall since 2010.
“It’s obviously disappointing to see UK dividends in decline this year, but investors should not to be too gloomy. The cuts are focused in a handful of large sectors, and so are relatively easy to avoid,” said Justin Cooper, chief executive of shareholder solutions, part of Capita Asset Services.
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