Dividend payments still scarce for investors

27 April 2010

Shareholders are still mourning a drop off in dividend payments in the first quarter, although the rate of decline is now at its slowest since the start of the recession.
UK companies paid out £13.6 billion in dividends during the first three months of 2010 - down 2.5% on the same period the previous year.
Some 186 companies paid a dividend, up from 161 a year ago. Of these, 56 companies cut or cancelled their dividends, 30 held them unchanged, but 102 increased or reinstated their payments.
Banks and oil giants were among the worst offenders with HSBC slashing £670 million off its payouts and BP and Shell cutting their dividends by a collective £330 million.
Paul Taylor, head of dividends at Capita Registrars, says: "Our heavy reliance on a few big companies for our dividends makes investors hostage to fortune.
The oil companies have been hit by tighter refining margins, while HSBC has been resetting its payouts at a lower level for the last 12 months.
"Even very strong performance from the rest of UK plc will make it difficult to make up for weakness at the top - as a result we expect the recovery in dividends to take longer than we had initially forecast," he adds.
However, Cadbury’s £133 million special dividend in February and Unilever’s decision to switch to quarterly dividends (which brought in £240 million) helped limit the overall damage for shareholders.
Overall, the FTSE 100 yielded 4%, dropping to 3.4% for the FTSE 250.
Capita Registrars has now downgraded its full-year forecast for dividends to £59.2 billion. This is a rise of just 1.3% from 2009, well below the forecasts for 5% growth back in January.
Taylor adds: "Even if dividends are being a little slow to recover, investors will be relieved that demands on their capital are finally returning to more normal levels. Company finances are in much better shape so dividends are no longer being recycled back into shoring up battered balance sheets."

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