adminLONDON – Sterling’s devaluation may have been bad news for holidaymakers but the fall in currency will boost dividends by £4,3 billion this year, according to Capita. In its latest quarterly dividend monitor Capita Asset Services said a dividend windfall was on its way as two-fifths of the dividends paid by UK listed companies were declared in dollars or euros.This means dividend payments are being converted at a much weaker exchange rate and boosting income for investors in the UK.
In the first half of 2016, dividend payments from FTSE 100 and 250 companies increased by £1,4 billion as the pound lost value ahead of the EU referendum vote and this is set to double in the second half with a further £2,8 billion of dividends paid out.
Justin Cooper, chief executive of shareholder solutions at Capital, said the ‘Brexit’ vote had ‘completely changed the picture for dividends this year and beyond’.
While Cooper predicted that ‘investment and consumption will be depressed’ in the short term as the country waited for a response from the new prime minister Theresa May and the outline of a Brexit timetable, Capita has upgraded its forecast for UK dividends.
The headline dividend forecast for the year has been upgraded to £82.5 billion, up 3,8 percent on last year and Q2 dividends reached a quarterly record of £28,8 billion.
The currency devaluation is not the only reason for the upgrade as a flurry of large special dividends has swelled investors’ returns.
In the second quarter special dividends have more than quadrupled year-on-year to £3,5 billion and a record 22 companies paid a special dividend.
The largest pay out was from Intercontinental Hotels (IHG), which distributed £1 billion after selling hotels in Paris and Hong Kong.
GlaxoSmithKline (GSK) paid out £970 million after an asset swap with biotech company Novartis and broadcaster ITV distributed £400 million thanks to bumper earnings.
This flurry of special payouts helped FTSE 100 dividends jump 9,9 percent over the second quarter to £24,7 billion. For the ‘mid cap’ stocks that make up the FTSE 250, it was a different story, with dividends falling 5,5 percent.
This was largely due to insurers Amlin and Brit dropping out of the index after takeovers, and house builder Persimmon’s (PSN) promotion to the FTSE 100. – City Wire.
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