Investors prosper as UK companies pay record dividends


Investors in the City of London were cheered by record dividends of £67.8bn last year, according to research.

Dividend payments paid out by UK-based companies went up by nearly a fifth, or 19.4 per cent, providing shareholders with an increased annual return for the first time since 2008. Capita Registrars and Exchange Data International said it reflects the trend that many companies have growing cash piles despite the gloomy economic outlook.

London-based oil company BP scrapped its dividend payments in 2010 following the Deepwater Horizon disaster, but paid out once again in 2011 to help increase the overall figures.

Companies also began paying back some of the cash they had been holding to insulate themselves from the economic uncertainty, with “special dividend” payments quadrupling to provide the “icing on the cake” for investors.

Antofagasta, the South American copper miner, paid out £600m, while power generation firm International Power handed over £1.6bn to investors.

But even removing the BP pay out and companies releasing cash held as cushions to investors, most businesses increased payouts and underlying dividends went up by almost 13 per cent.

Investors can look forward to an even sweeter return in 2012, according to Capita’s predictions. It forecasts dividend payments will increase by 11 per cent to £75bn.

Vodafone is expected to pay out nearly a tenth of all dividends in 2012, taking over from Shell as the number one payer. The mobile phone group will pay £2bn at the start of February from money it received from selling its stake in the US’s Verizon Wireless, while it also recent won a tax case in India to add to its coffers.

Charles Cryer, the chief executive of Capita, said: “Record dividends are providing a real bright spot for investors against a very gloomy backdrop of crisis in the eurozone and a stalling economic recovery in the UK.

“We are optimistic dividends will make further progress in 2012, unless the eurozone sinks deeper towards collapse and leads companies to retrench at home.”

Next year’s average yield is predicted to be 4.4 per cent, making the stock market a more attractive proposition for investors than buying bonds or savings.

Cryer said: “Expanding dividends mean the yield on equities looks remarkably attractive at present, although there are clearly risks to capital in holding shares, as with many other comparable asset classes.”