British dividends to rise despite BP, Capita says

Dividends paid by British companies, excluding those paid by BP, will rise by 9% to £59.6 billion, Capita Registrars forecasts.

If BP, once Britain’s top dividend payer, makes three dividend payments this year totalling £3.4 billion, then the overall amount will rise to 11.5% to £63 billion.

British dividends shrank by 3.3% throughout last year to £56.5 billion, £2 billion lower than 2009, when the country was hit hardest by the recession.

BP’s dividend cancellation of £5.4 billion was the main “culprit”, Capita says.

Last year, a total of 435 companies paid dividends, up from 417 in the previous year. Of those, 342 companies increased or reinstated dividends, while 107 cut or cancelled them.

In contrast, in 2009, the number of dividend cutters outnumbered those returning more cash to shareholders.

Excluding BP, dividends rose by 7.5% last year as the recovery continued. Capita says most of the growth came in the second half of the year, where dividends were up by 13%, compared with 2% in the first half. (article continues below)

FTSE 250 companies delivered the fastest increase with 16.3%, compared with 6.8% for FTSE 100 companies.

The FTSE 250 companies pay 9% of all dividends paid in Britain, however, so their contribution makes little impact on the total amount.

Their £5.1 billion is dwarfed by the £49.8 billion, or 88%, paid by FTSE 100 companies.

The “extreme concentration” of British dividends into just a few companies moderated somewhat last year, Capita says.

The top 15 companies paid 61% of all dividends, down from two thirds in the previous year.

A heavy reliance on banks and then oil companies has meant a tough two years for income investors, Capita says.