Dividends paid out by UK companies have soared to their highest level since 2008, buoyed by banks hiking their payouts and a lower pound.
A total of £29.2bn was paid out during the second quarter, shows data collected by Capita Asset Services, the highest second quarter on record.
“To say income investors had a bumper three months is an understatement, with payouts at a record high for a second quarter,” said Justin Cooper, chief executive of Shareholder solutions, which forms part of Capita.
Underlying dividends made up about £28.3bn of the total payouts, with special dividends pushing the total figure up to £29.2bn.
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.
Financial were the biggest contributors by far, increasing their dividends by 33 per cent year on year. HSBC hiked their payments, and Lloyds paid out £595m in the bank’s first dividend payment since the end of 2008.
Currency effects continue to buoy payments, as the lower pound contributed £800m in the second quarter.
With these latest figures, Capita is now forecasting that total underlying dividend payments will reach £84.8bn in 2015, a 7.2 per cent increase from last year. But the analysts also warn all is not “plain sailing”, citing the Greek crisis and a pressured supermarket sector as causes for concern – as well as recent changes announced by George Osborne.
The changes announced in the Budget also give pause for thought next year, bringing benefit to many small-scale investors, yet impacting higher rate tax payers and those with larger portfolios. This could well impact companies’ dividend policies in the future.