London, February 8th, 2010, According to the latest Capita Registrars Dividend Monitor which analyses thousands of dividends, using data provided by financial information specialists Exchange Data International, UK’s largest companies cut their dividend by 15%, paying out just £57 billion last year, a massive £10bn less than in 2008.
The banking sector was especially affected with banks slashing their dividends by half. The state-owned banks paid nothing, while HSBC only cut modestly and Standard Chartered actually increased its distributions to shareholders.
“The recession has hit dividends particularly hard because companies have not only had to cope with falling profits, but also massive pressure on their ability to finance themselves. Preserving cash has been a top priority, easily trumping shareholders’ need for income on their investments.”, said Paul Taylor, Head of Dividends at Capita Registrars.
Almost half of the dividend paid came from BP and Shell, Europe’s largest oil companies, HSBC, Vodafone and GlaxoSmithKline. In 2007, these companies paid only 35% of the total.
Last year also saw companies raising capital with a staggering £73 billion in new equity. For the whole of 2009, companies paid investors £16bn less in dividends than they demanded back in new capital. Paul Taylor commented: “There has been an unprecedented flow of capital from investors to companies. Over the last two years, companies have paid out £123bn in dividends, but absorbed an incredible £124bn in new equity to underpin their battered balance sheets.”
Despite an expected economic recovery, Capita Registrars estimates dividends in 2010 will total £59.6bn, a modest 5% increase. This is due to weakness in oil dividends and means the yield on UK equities for 2010 will be 3.4%, lower than the 3.5% in 2007, when both dividends and share prices were considerably higher.
Sources: Capita Registrars Dividend Monitor – Exchange Data International