Dividend payments in the third quarter of 2012 were the largest ever distributed by UK firms. In the third quarter, the total was £23.2bn (approx $37.2bn), up 10.4 per cent compared to the same period in 2011, according to the latest Dividend Monitor report from Capita Registrars, which analyses data provided by Exchange Data International. Q3 2012 is the seventh consecutive quarter of payout growth.
By the end of September London listed dividend paying companies had paid out a record total of £64.6bn since January, an increase of 17.1 per cent compared to the same period in 2011, equivalent to an additional £9.4bn ($15.9bn) in investors' pockets. Investors received more in the first three quarters of this year than they did in each of the full years 2007, 2009 and 2010.
However, despite the very large amount of cash paid out, third quarter saw the slowest quarterly growth rate since the fourth quarter of 2010, which had been depressed by the cancellation of BP (NYSE:BP) dividend after the Gulf of Mexico disaster.
Year to date, special dividends have totaled £6.4bn, £800m more than the combined totals of 2008-2010 inclusive, and 2.7x the amount paid out in the first three quarters of 2011, which was already a record.
Unlike many other recent quarters, such as first quarters'
2012 Vodafone (NASDAQ:VOD) (OTCPK:VODPF) payment, the total payout was not significantly flattered by special dividends. They reached only £432m ($693m), less than one fiftieth of the total. In the first half of the year, they made up one seventh of the total payout.
Johnson Matthey (OTCPK:JMPLF), the manufacturer of catalytic converters and other chemical-related products, was responsible for over half the Q3 2012 total. Severn Trent (OTCPK:SVTRF), the water utility company, made the other big Q3 payment, posting investors an additional £167m ($268m) in gross dividends
FTSE100 versus FTSE 250 companies
For the first nine months of the year, FTSE 100 companies paid out £58.5bn ($93.9bn), 18.5 per cent more than 2011. £6.3bn ($10.1bn) of this was due to special dividends, compared to £2.2bn ($3.5bn) last year
Dividends from FTSE 100 companies rose 11.1 per cent in the third quarter, markedly down on the 22.9 per cent rise in the first half. The UK's biggest companies paid £21.0bn ($33.7bn) to their shareholders in the three months to the end of September. The FTSE 250 dividends rose a headline 6.2 per cent to £1.9bn ($3bn). Vodafone's £3.5bn ($5.6bn) dividend was almost twice the size of the entire FTSE 250.
The top five companies were made up by Vodafone, Shell (NYSE:RDS.A) (NYSE:RDS.B), HSBC (HBC) (OTCPK:HBCYF), BP and National Grid (NYSE:NGG) (OTCPK:NGGTF). These five companies distributed £8.6bn ($13.8bn) in the third quarter. The top five companies accounted for 37% of the total paid out by the entire market in the third half, the lowest concentration of third quarter dividends since Capita began measuring this metric in 2007.
The top fifteen stocks paid out over two thirds of all dividends (68 per cent). In comparison, the FTSE 250 accounted for just one twelfth of third quarter dividends.
At a headline sector level, all groups except the small tech sector increased their payouts in the third quarter. Basic industries, industrials and basic materials topped the growth table, with the special dividend from Johnson Matthey behind the big increase in basic industry dividends.
At a subsector level in the third quarter, the biggest were the mobile telecoms, thanks entirely to Vodafone's £3.5bn ($5.6bn) dividend. At £3.2bn ($5.1bn), the oil and gas producers, mainly BP and Shell are close behind, up 11 per cent compared to the same quarter last year.
The miners came third with £1.8bn ($2.9bn), up 22 per cent year on year. In fourth place, pharma stocks paid £1.7bn ($2.7bn), but with essentially no increase over last year's total - Astrazeneca (NYSE:AZN) (OTCPK:AZNCF) and Glaxosmithkline (NYSE:GSK) were the two payers in the sector. GSK paid £1.4bn ($2.25bn) in the second quarter, including a £280m ($449m) special dividend.
226 companies paid a dividend in the third quarter, down from 228 in the same period last year. Among these, 173 increased, started or reinstated their payments, 36 cut or cancelled them while 11 kept them the same.
Charles Cryer, Chief Executive of Capita Shareholder Services said:
"The volume of cash being distributed by UK companies is unprecedented. The total for 2012 will be almost one sixth higher than last year's record £68bn ($109bn). Given the lack of high yielding alternatives, investors can be hugely relieved that equities are providing a decent income. Dividends cannot grow rapidly forever against the slower global economic backdrop, so the rapid increases of the last year or so may now be slowing down. It is also unlikely that special dividends will repeat their stellar performance next year. Nevertheless, our underlying forecast growth rate of 8% for next year is still a very respectable increase, and there is upside to our cash forecast from further one-off payments."
For the full year 2012, Capita are upgrading their forecast again, this time by £300m ($481m). Special dividends are again the main reason for the increase. For the full year Capita now forecast £78.6bn ($126bn) in total dividends, up 15.6 per cent from 2011. This is £3.6bn ($5.8bn) higher than the forecast made in January 2012.
Capita's forecast for 2013 is £81.0bn ($130bn); 3 per cent higher than 2012. The apparent lack of progress is mainly due to the fact that Capita does not attempt to forecast special dividends and they suspect that they are unlikely to be able to repeat the huge level of 2012.