Bloomberg News

U.K. Stock Dividends Rise to Highest in Three Years, Capita Says

October 17, 2011

Oct. 17 -- U.K. stock dividends rose to the highest level in three years and surpassed 20 billion pounds ($32 billion) in the third quarter, data from Capita Registrars showed, while share prices plunged the most since 2002.

Capita raised its forecast for full-year dividends by 1 billion pounds to 67 billion pounds, an increase of 18 percent from 2010. Dividends from companies listed on the FTSE 100 Index increased twice as fast as those from the smaller companies on FTSE 250 Index, the U.K.-based provider of share registration services said.

The benchmark FTSE 100 Index lost 14 percent in the quarter through September, the biggest drop since the same quarter nine years ago. The shares have jumped 6.6 percent so far this month as European leaders set themselves a month-end deadline to create a bank recapitalization plan as a step toward ending the euro-area debt crisis.

Quarterly dividends exceeded 20 billion pounds for the first time since June 2008. They “still have some way to go to top previous highs, but investors will be grateful that at least one asset class is providing a solid, inflation-proof income,” said Charles Cryer, chief executive officer of Capita Registrars.

Rising dividends, coupled with falling share prices, have boosted dividend yields, Capita said, analyzing data from Exchange Data International. The gap between dividend yields and bond yields expanded to an “unprecedented” 1.4 percentage points, it said.

‘Momentum May Slow’

For the full year, Capita projected that FTSE 100 stocks will yield 3.8 percent, while FTSE 250 stocks will yield 3.5 percent. Companies may not sustain this momentum next year, Cryer said. “Capita still expects dividends to grow, but the headline rate is likely to be somewhat slower,” due to the risk of an economic slowdown, he said.

Companies in all sectors increased their dividends in the third quarter, but industrial and commodity firms raised payouts by 23 percent, faster than the 10 percent growth for the so- called defensive sectors, such as telecommunications and tobacco.

Overall, 228 companies paid a dividend in the quarter, compared with 201 last year. FTSE 100 companies increased their dividends by 17 percent, while FTSE 250 companies raised theirs by 9 percent. This is the first time since December 2009 that dividend growth from big companies has exceeded that from mid- sized ones.

Vodafone Plc. made greater payouts than any other company as Europe’s biggest mobile telecommunication network operator paid out 3.5 billion pounds. BP Plc returned 900 million pounds to shareholders, half the quarterly level it paid before the company’s spill in the Gulf of Mexico in April 2010.

--Editors: Srinivasan Sivabalan, Will Hadfield

-0- Oct/13/2011 12:23 GMT

-0- Oct/13/2011 14:37 GMT

-0- Oct/14/2011 15:51 GMT

-0- Oct/14/2011 16:01 GMT

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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