Payouts give investors that special feeling again

Payouts give investors that special feeling again”

Asset Services said that special dividends rose to £1.5bn, driven by an extra £960m payout by Compass to its employees. Rio Tinto also paid a much larger dividend than the market expected, while higher copper production and a big increase in profits on silver mining boosted the respective payouts of Antofagasta and Fresnillo.

The latest Dividend Monitor from Capita Asset Services reported that United Kingdom companies paid out £28.5bn in the three months to the end of September, a record for a third quarter of the calendar year, leaving dividend pay-outs for the whole year "comfortably on track to smash the previous annual record set in 2014". Around 5% of this increase was attributable to the weaker currency - one-third of the total distributed in the second quarter was declared in U.S. dollars, with euros accounting for a small fraction more - adding £1.2bn to dividends in the second quarter.

Underlying dividends, which excluded specials, hit £27bn in the third quarter, which is also a third quarter record and is the second largest underlying payout for any quarter ever. After a period of high volatility, commodity prices began to rebound a year ago, driving mining profits higher.

The payout in the third quarter was up 14 percent compared to the same period past year.

Rolls Royce drove up the industrial goods and support services to £1.6bn after restoring its payout, while BT's payout pushed telecoms to a total of £3.5bn in dividends paid.

In the banking sector, Lloyds continued to provide most of the growth.

Stripping out the special divis, the third quarter pay-out level was 13.2% higher than the same level of 2016.

Capita is projecting £16.7bn of dividends in the fourth quarter, up by more than £3bn on its previous projection, which would take the full-year total to £94bn, up 11.1% from the previous year's £84.7bn and ahead of the current record year, which is 2014 when dividends totalled £88.1bn. "Generous payouts have been topped up by big exchange rate gains between January and June and very large special dividends, setting 2017 up to be a sparkling year". Therefore, in 2018 the dividend outlook is likely to become gloomier. Another concern is that the United Kingdom stock market is heavily concentrated, with the top 10 shares in the FTSE 100 paying around half of all dividends for the entire United Kingdom market.

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