FTSE 100 dividends grow at pace and deliver inflation-busting returns

Oliver Gill
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Research indicates only one of the FTSE 100 has cuts its half-year dividend in 2017 so far (Source: Getty)

Britain’s blue-chip firms have delivered inflation-busting returns to shareholders so far this year.

Just under 60 of the FTSE 100 will deliver first-half results updates in July and August, of which 53 have done so already.

Of the declaring companies, only one firm – publishing giant Pearson – has cut its dividend, according to stock broker AJ Bell. Meanwhile, 26 firms have increased shareholder payouts by at least 10 per cent.

Some £84.7bn of dividends are forecast to be paid out by the FTSE 100 in 2017, delivering a dividend yield of four per cent. This is well ahead of the latest UK headline rate of inflation of 2.6 per cent.

Read more: Aviva grows operating profit for the fourth year in a row

Taylor Wimpey hiked its interim dividend by 334 per cent, the largest increase of those that have declared so far.

Rio Tinto increased its payout by 158 per cent while Anglo American and Convatec upped interim returns by 100 per cent.

“Overall FTSE 100 dividend growth excluding special dividends has reached 15 per cent at the first half stage, with results from Antofagasta, Bunzl, Persimmon and WPP still to come this month,” said AJ Bell director Russ Mould.

Substantial increases from a handful of miners and a number of financial services plays have helped here, as has the pound’s drop against the euro and dollar, which enhanced the sterling contribution from heavyweights such as BP, Shell, HSBC and Unilever.

Quenching the investor thirst for increasing dividends was questioned by experts earlier this month given the size of firm’s pension shortfalls. FTSE 100 firms have paid out four times as much in dividends than pension contributions, according to research by LCP.

And AJ Bell warned large cap earnings are set to cover dividends by around 1.6 times in 2017. While higher than the 1.3 times noted in 2015 and 2016, it is almost half the ratio (nearly three times) in the years following the financial crisis.

Read more: Pearson slashes jobs and dividend as it battles on with restructuring

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