The “hangover” predicted for UK company dividends appears to be setting in after pay-outs to shareholders grew only slowly in the first three months of the year.
Last year, UK dividends set a record after a 10.5% year-on-year rise, but the growth rate was predicted to fall in 2018.
Duly, the value of dividends recorded a 0.1% dip in the first quarter (Q1) compared to the previous quarter once the data was adjusted for unusual payments. Including these “one-offs” – such as a £1 billion (€1.13 billion) pay-out by British American Tobacco – there was a 1.2% rise, which translated into £16.7 billion of dividend payments overall in Q1.
Link Asset Services, which produces the quarterly ‘UK Dividend Monitor’, said a sharply weaker dollar was partly to blame as over two-fifths of Q1 dividends are paid in the US currency.
Additionally, some companies – especially those in the oil and pharmaceutical sectors – recorded no dividend growth at all, though the mining sector continued to show strength and consumer-related companies did well, too.
Justin Cooper, chief executive of Link Market Services, a part of Link Asset Services, said investors should not be worried and that dividend growth would continue in 2018, albeit at a slower rate.
Cooper said: “The stock market recently reminded investors that volatility is the norm for share prices, not the exception. When markets become this choppy, it’s well worth remembering that profits continue to be made, and dividends continue to be paid, and that, over the long term, dividends constitute the lion’s share of an investor’s returns.”
The firm increased it headline forecast for dividend growth to 1.8% (from a January forecast of 1.6%). This would represent £96.3 billion and compares to an actual £94.4 billion paid last year.
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