£10bn slashed from dividend payouts

Monday, 08 February 2010 12:27

By myfinances.co.uk staff

Last year proved to be a difficult year for investors as dividends from the UK's largest companies were cut by a total of £10 billion, a new report has revealed.

In total £57 billion was paid out in dividends, according to research from Capita Registrars, 15% less than in 2008 despite a recovery in share prices which started in March.

Financial services firms cut £8.2 billion of payments which included £6.1 billion slashed from the banking sector.

The state-owned banks paid nothing, while HSBC only cut modestly and Standard Chartered actually increased its distribution to shareholders.

But oil investments proved a good bet with £3 billion more paid out than in 2008, a 26% increase on dividends paid out last year.

Utilities and cigarette groups also increased payments by 5 per cent over the year.

But dividends from high-street retailers fell 62%, with household goods producers cutting payments by 64%.

Last year also saw companies raising capital as they tried to shore up balance sheets. UK companies raised £73 billion in new equity - £16 billion more than was paid out in dividends. After adjusting for cash calls, no dividends have effectively been paid since December 2007.

The top dividend payers in 2009 were BP, Royal Dutch Shell, HSBC, Vodafone and GlaxoSmithKline. They accounted for 47% of all payments. In 2007, the companies made 35% of the total.

In total 202 UK companies cut their dividend last year and 74 of these groups made no payment at all, some because they went into liquidation.

A total of 179 companies increased their payouts and 60 held them steady.

"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," according to Paul Taylor, head of dividends at Capital Registrars.

Despite the woeful news for investors Capital Registrars forecast a modest recovery for 2010. It expects dividends to rise 5 per cent in 2010 to £59.6 billion. The yield on the UK market is forecast at 3.4 per cent compared with 3.5 per cent in 2007.

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