AppId is over the quota
AppId is over the quota
By Simon Jessop
LONDON | Mon Oct 17, 2011 6:39am BST
LONDON (Reuters) - Payouts to shareholders by cash-rich UK firms passed 20 billion pounds in the third quarter, for the first time since the collapse of Lehman Brothers in late 2008, as a weak economy crimped their dealmaking and investment spending.
While the pace of dividend growth is expected to slow towards the end of the year and into 2012, weighed by a hazy growth outlook, the robust nature of many corporate balance sheets should continue to act as support, Capita Registrars, a unit of Capita Group (CPI.L), said in a quarterly report on Monday.
"Investors can at least take comfort that firms are well capitalised, more so than at the time of the last major financial crisis, and are better able to withstand renewed turmoil," Capita Registrars Chief Executive Charles Cryer said.
As a result of the quarterly gain, Capita Registrars, which registers the ownership of shares, raised its full-year payout forecast by 1 billion to 67 billion pounds, up 18 percent and still on course for the best year since 2008.
While the resumption of dividends from oil major BP (BP.L) and other one-off factors had helped drive the gain, even without these, growth was still a "healthy" 11 percent . The nine-month total, meanwhile, is just shy of that for full-year 2010.
"Dividends are growing faster than we expected as UK firms shrug off the worst stock market conditions since 2008 and continue to increase payouts to shareholders," Capita Registrars Chief Executive Charles Cryer said.
The FTSE 100 .FTSE fell 14 percent in the third quarter, weighed by concern that major developed economies were set to slip back into recession, and by fears the euro zone debt crisis would spread.
Dividend growth for stocks in the blue-chip index exceeded that for the mid-caps .FTMC for the first time since the last quarter of 2009, Capita Registrars said, with growth of 17 percent from the FTSE 100 near twice the FTSE 250's 9 percent.
For the first time since Capita began the research, all sectors increased their dividend, with cyclical sectors, up 23 percent, outperforming defensives, up 10 percent.
"The arrival of Glencore on the exchange provided 224 million pounds for its shareholders, but other mining stocks paid an additional 200 million between them too, making miners again one of the best-performing sectors," Capita Registrars said.
A total of 228 companies paid a dividend in the third quarter, compared with 221 in 2010, of which 196 either increased, reinstated or started paying dividends, while 23 cut or cancelled them, Capita Registrars said.
"This means the increases/reinstatements outnumbered the cuts/cancellations by 8.5:1, demonstrating how widely spread the improvement in income distributions is across the stock market," it said.
SPREAD TO BONDS
The sharp third-quarter stock market falls pushed yields on UK equities higher and meant those stocks paying a dividend were attractive relative to low-yielding bonds and against the backdrop of rising inflation.
The prospective equity yield for 2011 is 3.8 percent, up from 3.6 percent in July, Capita Registrars said, with the FTSE 100 set to yield 3.8 percent and contribute 88 percent of the annual total. The FTSE 250 will yield 3.5 percent.
Ten-year gilt yields, meanwhile, plunged 1.1 percentage points in the third quarter, taking equity yields to an unprecedented spread over bonds of 140 basis points, it added, although the outlook for 2012 was unclear.
"A yield this high relative to bonds is very rare indeed, but risks to capital are great, and the market may be judging that earnings, and therefore dividends, are vulnerable to a renewed economic slowdown. The jury is out on whether dividends can sustain this momentum next year," Cryer said.
(Reporting by Simon Jessop; Editing by Erica Billingham)
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