The weakened pound could spark a 7.5% increase in dividends from UK-listed companies this year, according to data in Capita’s latest UK Dividend Monitor report.
In total the study estimates underlying dividends worth £84.4bn will be paid out by UK companies in 2017, £87.1bn at a headline level. That compares to an underlying £78.6bn payout last year.
The prospective yield over the next 12 months remains largely unchanged at 3.7% across the entire market, although FTSE 100 companies look set to combine for an marginally above average 3.8%.
That's a substantial premium to 10 year UK Gilt yields or instant access savings accounts, at 1.3% and 1% respectively for 2017.
Source, Capita UK Dividend Monitor report
Mid-caps in the FTSE 250 index are expected to yield 2.5% in 2017.
RETURN OF THE BIG PAYERS
Capita's UK Dividend Monitor report is an exhaustive study of headline and underlying patterns across the UK stock market.
Encouragingly for investors, the report predicts that many large company payouts could return after cut backs during 2016. However, it also cautions that the scale of last year's £6.1bn boost from special dividends is unlikely to be matched.
Source, Capita UK Dividend Monitor report
OIL RALLY
2016 highlights show that oil major Royal Dutch Shell (RDSB) comfortably produced the largest increase in UK dividends in
2016. And having raised billions in new capital to fund its acquisition of BG, all these new shares qualified for the payout.
Led by Shell, the list of the top five dividends of 2016 remains unchanged from the previous year, with HSBC (HSBA), BP (BP.), GlaxoSmithKline (GSK) and Vodafone (VOD) ranking second to fifth respectively.
Investors should be relieved about recovering oil prices as dividends from the industry make up 20% of the UK’s total. Capita also flags rebounding metal price as supportive of the otherwise struggling mining sector.
The asset services provider is optimistic that certain stocks will reinstate axed dividends, including Standard Chartered (STAN) and Glencore (GLEN), adding £1.5bn to overall payouts.
