The Capita Asset Services UK Dividend Monitor provides comprehensive data, trends and analysis on dividends paid out on the ordinary shares of companies listed on the UK Main Market. The report provides a unique source of dividend data that spans10 years’ of coverage data for UK plc, providing you with access to in-depth market research and insight.
For a quick summary of Q1 2017 dividend data and commentary, you can watch this video featuring Justin Cooper, CEO Shareholder Solutions.
2017 saw a brisk start for UK dividends. The headline figures are impressive, but growth was relatively narrowly based. It depended heavily on large exchange rate gains, as well as a stronger-than-expected rebound in BHP Billiton’s payout. Meanwhile a steep decline in special dividends had a negative impact.
Overall, UK dividends rose 9.5% year-on-year in the first quarter. The £15.4bn headline total was in line with our £15.6bn forecast, and came despite a 90% decline in special dividends to just £110m, their weakest quarter in almost six years. After the huge haul of specials in 2016, a normalisation this year was on the cards. Even so, the fall in the first quarter was twice as large as we had pencilled in, and knocked five percentage points off the headline growth rate.
Exchange rate factors easily offset the special-dividend effect, however. The first quarter is the most heavily skewed towards dividends declared in foreign currencies, accounting for three fifths of the total, compared to a little over two-fifths for the year as a whole. Exchange rate effects obviously depend on which currency your investments are based in, but since the Dividend Monitor measures in sterling, the pound’s weakness yields exchange rate gains when UK multinational profits earned overseas are repatriated and paid out in dividends.
Over the quarter, the pound was 15% weaker against the dollar compared to Q1 2016, bringing an exchange rate gain £1.5bn. The stronger euro, along with Vodafone switching its accounting to that currency, added an additional £200m of gains on top. In total, exchange rate factors added twelve percentage points to the headline growth rate.
BHP Billiton also made a marked impact. Having slashed £1.2bn from its payout in 2016 to help it weather the commodities downturn, the company had stated its intention to begin growing its dividends again this year, from the new, lower base. Consensus estimates had the company paying around £450m in the first quarter, but it in fact distributed just under £700m (flattered by the exchange rate). Its energetic return to form accounted for 3.5 percentage points of the headline growth rate.
On an underlying basis, which excludes special dividends, the year-on-year increase was 16.2%, taking underlying dividends to a first quarter record of £15.3bn. Without the combined effect of foreign exchange movements, and the unexpectedly large boost from BHP Billiton, however, underlying dividends would have fallen slightly year-on-year, indicating that sustained growth is still hard to come by.
With grateful thanks to Exchange Data International for providing the raw data