“To say income investors had a bumper three months is an understatement,” says Justin Cooper of fund administrators Capita Asset Services. UK firms paid out £29.2bn in dividends in the second quarter, a new record for the April-June period. Strip out special, or one-off dividends, and the total was still £28.3bn, also a record. Large UK-listed firms benefited from a stronger dollar (many report in dollars), while mid-caps tapped into solid domestic growth.
The biggest contributors to the rise were banks. In the crisis, “the shock that overwhelmed the banks was so unexpected (to them) that some were reduced to seeking state aid between declaring their 2007 dividend and paying it”, says Neil Collins in the Financial Times. But now they are returning to health, comprising over a third of payouts for the quarter. Lloyds has returned to the dividend register for the first time post-crisis. Its £595m made it one of the top 15 payers.
The big picture, moreover, is one of strong growth in income during the past few years, as the dip during the crisis was overcome by 2011, when the £69.7bn annual total eclipsed the 2008 peak. This year we are on track for £87.2bn, reckons Capita, a 7.2% year-on-year rise. As we often point out, reinvested dividends make up the vast majority of equity returns over time, so this is excellent news for stockmarket investors.