UK companies have continued to boost dividends despite the uncertain economic environment, according to a quarterly dividend report from Capita, the share registrar.
Dividends in the third quarter rose by 15.9 per cent – or £2.9 bn ($4.6 bn) – compared with the same period in 2010, driven higher by mining stocks and the return of BP, which cut its dividend following the Deepwater Horizon fire and oil spill.
The growth in dividend payments was broad-based, with almost all sectors seeing a rise in payments.
‘UK companies are cash-rich, with investment needs relatively low given the weakness in the economy, and gearing levels much reduced following the shock of the credit crunch,’ states Capita in the report. ‘That cash has begun to flow back to investors.’
The registrar sounded a word of caution, however, saying the weak economic outlook means finance directors may decide to draw in their purse strings over the coming quarters.
‘Many of the decisions to pay dividends in the third quarter were taken before the worst of the stock market’s gyrations were underway, and before fears of a new global recession began to crystallize,’ notes Capita.
[Article by Tim Human, Inside Investor Relations]