Recovering UK companies pay out record in dividends

Investors in British companies enjoyed their highest ever dividend return in the last three months, as the total pay-out hit a record £23.2bn for the third quarter, reports The Telegraph.

UK companies are distributing an “unprecedented” volume of cash, according to the latest Dividend Monitor from outsourcers Capita.
Chemicals company Johnson Matthey was responsible for more than half the quarter’s dividend pay out. But in contrast to many recent quarters, the return to shareholders was not driven by special, or one-off, dividends, which totalled less than 2pc of the sum.

Capita said the dividend pay-out for the current year should total £78.6bn, a new annual record, with 2013 set to top that at £81bn.

The rise in pay-outs to shareholders comes as recovering British businesses sit on a corporate cash pile of around £750bn, which they are proving reluctant to spend on investment projects given the economic uncertainties. That, coupled with their low debt servicing costs, means they are now paying money out to shareholders.

There were signs of a slowdown in the pace of dividend increases. The figure for the third quarter marked a 10.4pc rise on a year ago, the slowest growth rate in two years.

However, market-watchers said there was still scope for investors to reap rewards. Charles Cryer, chief executive of Capita Shareholder Services, said: “Given the lack of high yielding alternatives, investors can be hugely relieved that equities are providing a decent income.

“Dividends cannot grow rapidly forever against the slower global economic backdrop, so the rapid increases of the last year or so may now be slowing down. Nevertheless, our underlying forecast growth rate of 8pc for next year is still a very respectable increase.”