Good news! Q1 dividend pay-outs hit record £18.8bn

Underlying growth improves compared with Q1 2011 and profit warnings drop sharply

The amount paid out by UK listed companies in dividends in the first three months of the year has gone up by 25 per cent to hit a record £18.8bn.

This doesn’t mean companies are completely in the clear: the bumper payouts of £2.2bn for shareholders by Cairn Energy and Vodafone have disguised what has been a weaker than forecast performance, according to the Dividend Monitor from Capita Registrars.

But underlying growth was 6.6 per cent higher than during the first quarter of 2011, once one-off factors had been stripped out. This is much slower than the 12.8 per cent rise last year and behind Capita’s expected growth rate for this year.

Dividends from FTSE 250 Index firms, the second tier of the London stock market, dropped by nine per cent compared to last year to £915m, the first time a quarterly decline has been seen since 2009.

Mid-cap listed companies have been cautious over making dividend payments, while Cable & Wireless Worldwide cut its pay out, costing £24m.

But Charles Cryer, the chief executive of Capita Registrars, said 2012 was still going to be a record year for dividend growth.

“We have upgraded our headline forecast to reflect the big one-offs, but the picture is more complex than the headlines suggest,” said Cryer.

“The economy stumbled in the fourth quarter as the eurozone crisis knocked confidence in Britain and raised fears of a new credit crunch.

“Roughly two thirds of firms who paid in the first quarter decided their dividends before the new year – the fourth quarter economic weakness seems to have caused them to show greater caution.”

Meanwhile, a separate report from Ernst & Young found the number of profit warnings by listed companies had dropped sharply. Confidence in the UK economy has grown after tensions over the eurozone debt crisis eased.

Just 16 profit warnings were made in March, the lowest for nine years, after 57 profit alerts were issued in the first two months of the year when economic fears around the world discontinued or delayed contracts, the report said.

The number of profit warnings issued in the first quarter fell from 75 last year to 73, while a third (33 per cent) were made by drug and food retailers and 16 per cent in personal goods.

A settlement on Greek debt and liquidity injections from the European Central Bank helped to allay fears about the eurozone crisis, according to Ernst & Young partner Keith McGregor.

But he said many companies could struggle to predict trading due to the impact of the Olympics and the extra Jubilee Bank Holiday.