Banks drive United Kingdom dividends to post-crisis high

The firm says this is the highest second-quarter payout on record.

At an underlying level, without special dividends, the total was £28.3bn, the highest payout on record. Banks unsurprisingly contributed a great deal, with HSBC hiking its payments and Lloyds paying out a total of £595 million, in its first dividend payment since the close of 2008.

Barclays’ final payment of £642 million slipped back from the first quarter to the second; however, adjusting for this, Capita says financials still saw growth of almost 25 per cent.

However, Justin Cooper, chief executive of shareholder solutions at Capita Asset Services, warned tougher times could be ahead.

According to Capita, while the reintroduction of Lloyds’ dividend was well below the bank’s former might, it was an “excellent sign that normality is returning to the battered sector”. Housebuilders and beverage companies also benefited from an increase in consumer spending.

“Given the worldwide complexion of the FTSE 100 in particular, many companies declare their dividends in USA dollars”.

The payment policies could also be affected in future by the Chancellor’s surprise move to replace the dividend tax credit with a £5,000 tax-free allowance on dividend income from 2016. Capita claims that this is the fastest rate of growth in any quarter since 2010, and the fifth consecutive quarter that medium-sized companies have reported accelerating dividend growth.

Based on the expectation that the prevailing exchange rate will persist for the remainder of the year, Capita has raised its forecast for the full year to £87.2bn, which is 10% lower than the headline level for 2014, which was boosted significantly by the Vodafone special dividend. The firm said then that payouts increased only 1.2 percent on an annual basis due to slow corporate earnings growth and currency exchange.

“The outlook has been improving, but it’s not all plain sailing”.