The Big Picture
Dividend forecast falls as Q1 payments rise 15.7% 120 100 80 60 40 20 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019e
Regular dividends Billion £
Special dividends
Total dividends Source: Who knows
London-listed
companies
returned
a
record
amount of cash to shareholders in the first quar- ter, according to Link Asset Services. Investors received £19.7bn in the opening three months of 2019, a 15.7% jump on the amount paid during the same period a year earlier. This rise was largely the result of favourable exchange rates, which contributed to more than 60% of the growth. Special dividends also played a part. Mining giant BHP returned £1.7bn on top of its regular dividend after selling its US shale oil interests.
If special payments are removed from the analy- sis, dividends grew only 5.5% to £17.6bn during the quarter.
Almost 40% of the dividends paid from compa- nies listed in London came from pharmaceuti- cals and oil companies, which benefited from exchange rate movements.
UK equities yield 4.6%, excluding special pay- ments, which is slightly below the 10-year high that it reached in January. However, lower growth in corporate earnings has led Link to revise its yield forecasts for 2019 to 3.9%, down from the 5.3% it set in January. This means that it expects
the boardrooms of listed companies in the UK to give investors £99.7bn from their profits this year, which would make it a record year. Once specials are considered, the headline divi- dend total for the year rises to £106.1bn, Link pre- dicts, 6.3% higher than was returned to share- holders in 2018. Link’s chief operating officer, Michael Kempe, said that the first quarter is usually the warm-up act for dividends, but this year it has put in a stel- lar performance. “Miners are taking centre stage with large special dividends, but these reflect restructuring and asset sales rather than trading profits; underlying growth from this sector is now much more normal after grabbing the head- lines over the past couple of years.” He added that despite the uncertainty hitting markets, 2019 “will show good growth, even if Q1 was, in truth, a touch weaker than we expected on an underlying basis”. “Moreover, the yield on UK shares is a third higher than its long-run average and suggests equities are still extremely cheap, both in com- parison to other countries and to other asset classes.”
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