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Peer2Peer Finance News | August 21, 2017

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Investors enjoying “knockout year” as dividends hit new record

Investors enjoying “knockout year” as dividends hit new record
John Fitzsimons

DIVIDENDS paid by British businesses hit an all-time record in the second quarter of 2017, jumping 14.5 per cent year-on-year to £33.3bn.

That’s according to the latest Dividend Monitor from Capita Asset Services, which said that the sharp annual increase was down to a combination of underlying growth, a substantial boost from the weak pound and a large number of special dividends.

Special payments were the second highest on record at £4.6bn, though even when they were excluded normal dividends to investors rose 12.6 per cent to £28.6bn, itself a new record.

Read more: Alternative finance funds beat the sector average for dividend yield

Capita pointed out that growth was particularly strong in the mining sector, with every company raising its payouts, while businesses involved in consumer goods and housebuilding also increased dividends.

Althoufh the financial sector is the largest, its dividends were increased at a slower than average rate according to the study.

As a result of the strong performance, Capita has upgraded its dividend forecast to £90.6bn for the year, which represents a seven per cent annual increase, with the prospective yield increasing from 3.6 per cent in April to 3.7 per cent.

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Justin Cooper, chief executive of Shareholder solutions, part of Capita Asset Services, said the UK is set to deliver a “knockout year” for dividends, but warned that the rest of 2017 is likely to be rather quieter for investors.

“Most of the excitement for 2017 is now behind us,” he said. “As we move towards 2018, the extent to which the weakening UK economy continues to diverge from improving trends elsewhere in the world will determine which companies are still able to deliver strong dividend growth. The uncertainty over the economy, the Brexit negotiations, and the unstable political situation are key factors to watch.”

Read more: Household savings rate hits record low