Capita: UK dividend payouts plunge in first quarter

UK dividend growth suffered a setback in the first quarter of 2013, falling 25% year-on-year, according to Capita Registrars.

UK firms paid out £14.1bn between January and March, compared to £18.8bn in the first quarter of 2012, according to Capita Registrars’ latest Dividend Monitor.

Justin Cooper, Capita Registrars’ chief executive, said a decline in special dividend payouts stunted headline dividend growth in the first quarter.

Around £4.4bn of special dividends made by Vodafone and Cairn Energy in Q1 2012 were not repeated this time around, weighing on dividend growth.

The pharmaceutical sector had the largest negative effect on the numbers, declining 2.7% with AstraZeneca the biggest culprit, recording negative dividend growth in sterling terms.

In contrast, cyclical companies faired strongly, increasing their distributions by 8.7%.

“Investors, particularly institutional ones, value predictability when it comes to dividends, as they have liabilities to meet, but so do those private investors who live off the income from their investments,” Cooper said.

“Big swings from one period to the next can be difficult to manage. Distortions of the magnitude seen in Q1 are unusual and unlikely to be repeated later in the year.”

Underlying dividends, which strip out one-off payouts, rose 6.1%, a marked slowdown on the underlying growth of 9.2% in 2012.

Cooper said defensive UK blue chips lagged the wider market during the first quarter, also contributing to the fall in underlying growth.

 “The figures do confirm what we have been saying in recent months. There is a modest slowdown in underlying dividend growth, but that 6.1% should not be considered a poor performance,” he added.

Despite the sharp drop in Q1 dividends, Capita is confident its forecast for underlying dividend growth of 8.6%, or £78.6bn, for 2013 can be achieved.

Dividend payouts 2007-2013

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This article was first published on Investment Week

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