Capita have just published their latest quarterly UK Dividend Monitor report revealing that UK dividends rose to a quarterly record of £28.8 billion in Q2 2016. Currency translation effects have had a significant impact for multinational companies as Sterling has weakened in 2016, especially following the Referendum. Approximately 40% of the dividends paid by UK listed groups are in US dollars or Euros. Capita anticipates that exchange rate gains will lift payouts by £4.3billion this year, offsetting a number of dividend cuts earlier in 2016.
• The forecast for overall payouts in 2016 has been increased to £82.5 billion based on the impact of these foreign currency payments.
• Underlying dividends, which exclude special dividend payments, are expected to be 0.5% higher this year at £76.9 billion, says Capita. We tend to focus on the underlying figure when assessing trends because the overall figure has been swelled by an unusual number of special dividend payments.
• Special dividends have more than quadrupled year on year to £3.5 billion. Twenty-two companies paid a special dividend in the second quarter, by far the largest number on record for any quarter. We note that underlying dividends fell in the second quarter in spite of a £960 million exchange rate gain due to Sterling weakness. Profit growth remains sluggish for companies and we remain wary with regard to the amount of financial cover companies have to sustain dividends…….