British stocks splash the cash

London-listed stocks are paying out record levels of income in dividends.

Reinvested dividends account for the majority of long-term returns from stocks; capital gains only play a small part. So it's good news that British stocks are paying out record levels of income. According to the Capita Dividend Monitor from Capita Asset Services, UK dividends reached £27.2bn between July and September, up 6.8% up on the year before. Strip out special dividends, and underlying growth was still a healthy 5.9%.

The strong dollar helped. Half of the dividends by value from the top 20 payers are declared in dollars, providing a windfall of £600m and raising the third-quarter dividend growth rate by 2.4%. Mid-cap dividend growth jumped by 31% including special dividends; strip these out, and they rose by 11%. In 2015 as a whole, underlying dividends in the FTSE 350 will reach a new annual record of £84.8bn, reckons Capita.

But dividend growth looks set to slow to around 3% next year. The commodity sector looks likely to announce more cuts in payouts, with Glencore already announcing one of £1.5bn. The FTSE 100 is heavily weighted towards energy and mining. The emerging-market downturn has also undermined dividend growth, with Standard Chartered announcing a cut for next year.

The currency effect, moreover, is fading. Mid-caps' payouts are set to keep growing faster as they are less exposed to global turmoil. In all, the UK market will yield around 4% in the next 12 months, which "still compares very favourably to other asset classes".

Recommended

The FTSE 100 has clawed back above 7,000 – how much higher can it go?
UK stockmarkets

The FTSE 100 has clawed back above 7,000 – how much higher can it go?

The FTSE 100 index has risen to over 7,000 for the first time in over a year – it now sits just above where it was in 1999. But its era of neglect cou…
19 Apr 2021
How the FTSE 100 could get propelled to 10,000
FTSE 100

How the FTSE 100 could get propelled to 10,000

It would have seemed crazy just months ago, but British blue-chip stocks are about to get a big boost that could take the FTSE 100 index to 10,000, sa…
21 Mar 2021
The FTSE 100 index is ready to rally
UK stockmarkets

The FTSE 100 index is ready to rally

The FTSE 100 index – made up of unfashionable “old economy” stocks – has lagged other major stockmarkets. But global reflation should see its weakness…
19 Feb 2021
UK stocks: how the FTSE 100 is finding its feet again
UK stockmarkets

UK stocks: how the FTSE 100 is finding its feet again

The FTSE 100, Britain’s blue-chip stockmarket index, has undergone constant churn in the 37 years since its inception, says Max King. But it is now …
12 Feb 2021

Most Popular

“Joke” cryptocurrency dogecoin goes to the moon. What’s going on?
Bitcoin

“Joke” cryptocurrency dogecoin goes to the moon. What’s going on?

Dogecoin – a cryptocurrency created as a joke – has risen by more than 9,000% this year alone. Saloni Sardana looks at how something that began as an …
19 Apr 2021
The FTSE 100 has clawed back above 7,000 – how much higher can it go?
UK stockmarkets

The FTSE 100 has clawed back above 7,000 – how much higher can it go?

The FTSE 100 index has risen to over 7,000 for the first time in over a year – it now sits just above where it was in 1999. But its era of neglect cou…
19 Apr 2021
The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021