UK 2010 dividends seen falling less after strong Q3 payouts

Monday, 18 October 2010 17:35 - - {{hitsCtrl.values.hits}}

LONDON, (Reuters) - Dividend payments by UK-listed firms will fall less than expected this year after payouts grew in the third quarter, the first time since the first quarter of 2009, Capita Registrars said.

Capita Registrars, which provides share register administration services, has raised its forecast for total dividend payouts in 2010 to 55.7 billion pounds ($89 billion), up from its previous estimate of 54.7 billion but still down on last year’s payout of 58.7 billion pounds.

However, dividends in the third quarter this year rose 1.6 percent on a year ago to 17.6 billion pounds, Capita said. For the first nine months of 2010 dividends totalled 46.1 billion, down from 47.8 billion over the same period last year.

“Investors can finally breathe a sigh of relief after a long and painful period of shrinking dividends. Payouts are growing again, and at a pretty rapid pace, once one-offs are taken into account,” Charles Cryer, chief executive of Capita Registrars, a unit of Capita Group

“Seeing corporate UK in better health will give the Treasury some cheer ahead of the impending spending review that the economy can withstand the cuts,” he said.

Britain’s coalition government is set to slash spending to tackle a budget deficit running at around 11 percent of national output, with a plan for cuts due to be revealed with the Comprehensive Spending Review due on Oct. 20.

Excluding oil major BP, which suspended dividends after the Gulf of Mexico oil spill, third-quarter payouts from UK-listed firms rose 13 percent, the fastest increase since the first quarter of 2008. BP was the top dividend payer in Britain in 2009.

The top five UK dividend payers in the third quarter were Vodafone, HSBC, National Grid, Royal Dutch Shell and GlaxoSmithKline, representing 41 percent of UK Plc’s payments to shareholders, Capita said.

During the same period, companies in the mid-cap FTSE 250 distributed 1.4 billion pounds, an increase of 33 percent over the same period last year.

“An overwhelming majority of companies are now raising payments so the recovery in dividends is now very broadly spread,” Cryer said.

“Taking out one-offs, double-digit growth across the FTSE 350 in the third quarter is a very solid performance. Even with the sharp uptick in share prices, yields still look very attractive, especially with income growing again.” The FTSE 100 index offers a dividend yield of 3.2 percent for this year, Thomson Reuters Datastream data showed, while the benchmark 10-year British gilts yield is 2.938 percent. The mid-cap index offers a dividend yield of 2.3 percent.

According to Thomson Reuters I/B/E/S Estimates the FTSE 100 companies are on average expected by analysts to post earnings growth of 56.6 percent in 2010 and 19.3 percent in 2011. That compared with 12.4 percent growth for FTSE 250 firms this year and 16.7 percent for next year.