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Dividend Monitor Q2 2017

UK companies distributed an all-time record £33.3bn in dividends in the second quarter, comfortably beating the previous record of £29.1bn set in Q2 last year. The 14.5% increase was the fastest in over three years. It reflected very healthy underlying growth, topped up with a substantial boost from the weak pound, plus a large haul of special dividends.

Indeed, special payouts of £4.6bn were the second-highest on record for any quarter, owing mainly to a £3.2bn payment from National Grid on the sale of its 61% stake in its UK gas distribution business. When companies make big disposals, they often use special dividends to distribute the proceeds, thereby distinguishing them from regular dividends accrued on day-to-day operations. More cash will find its way to National Grid’s shareholders by way of a share buy-back. Meanwhile, Lloyds Bank, now enjoying surging profits, paid £357m as a special, on top of a £1.2bn regular dividend, while ITV and Intercontinental Hotels also made large payments. 20 companies in total paid specials in Q2, the second-highest number in any quarter on record.

Underlying dividends (which exclude specials) reached £28.6bn, also a comfortable record, increasing 12.6% year-on-year. A little under five percentage points of this increase came from the effect of the weaker pound translating dollar and euro dividends at a more favourable exchange rate; one-third of the total distributed in the second quarter was declared in US dollars, with euros accounting for a small fraction more. That effect added up to £1.2bn in the second quarter. On a constant-currency basis, underlying growth was nevertheless an impressive 7.8%, the fastest increase in two years. This particularly reflected a resurgent mining sector, but rising profits elsewhere also made a positive impact. For many companies, even if they declare dividends in sterling, the weaker pound is also boosting the sterling value of overseas operations, or export sales, supercharging their profits and so their dividends.

  • National Grid paid a very large special dividend, accounting for three quarters of the increase in headline dividends
  • Mining companies saw payout surge
  • The largest dividends came from financials, but they grew more slowly than the average; insurance dividends fell year-on-year
  • Consumer goods and housebuilders performed especially well – every company raised its payout
  • 12 sectors raised payouts against 7 that saw them fall

At the underlying level, which excludes special dividends, resources companies accounted for £1.1bn out of the total £2.6bn year-on-year increase. The miners in particular saw payouts surge. Glencore restarted dividends for the first time since 2015, when it had cancelled them as slumping commodity prices hit its bottom line hard. Its £390m payment was 10% higher than we had forecast. More importantly, Rio Tinto, whose operations have soared back into the black, paid a much larger dividend than the market expected, and well ahead of the minimum the company had indicated, adding almost £400m year-on-year. Higher copper production and a big increase in profits on silver mining boosted the respective payouts of Antofagasta and Fresnillo too. Every mining company increased its payout, with the pound’s weakness helping all of them.

Banks and financials easily paid the most in Q2, totalling £10.3bn, though this was up only 3.8% year-on-year, well below the wider market. Dividends from insurance companies were lower, with a cut from Old Mutual and Admiral, and because Direct Line did not repeat its special. In the banking sector, the big increase from Lloyds was partially offset by a well-flagged cut from Barclays. HSBC held its dollar dividend flat, but that meant an increase in sterling terms. Property companies raised payouts substantially, while general financials saw a modest rise.

In the consumer goods and housebuilder grouping, every company increased its payout, but the total for the retail and consumer services group fell year-on-year. Sky, under the terms of its pending acquisition by Fox, will not pay dividends during the calendar year 2017, while ITV and Intercontinental Hotels paid much smaller specials this year than last. Most other companies in the group increased year-on-year.

Elsewhere, a large increase in oil dividends was mainly due to the weaker pound, while the fall from the healthcare and pharmaceutical group was because Glaxo did not repeat its special dividend this year.

Overall, 12 sectors out of 17 paid more in Q2 this year than last.



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