First quarter 2012 has been something of a dividend bonanza for dividend investors as Capita Registrars released information that showed that dividends paid in the first half of 2012 have now reached an ‘all-time high”.
At £41.4bn, first half year dividends paid were 21% higher than a year ago and well above the previous high of £34.5bn reported in the first half of 2008. Dividends rose 18.4% in the second quarter to £22.6 billion, with the five biggest payers accounting for 36% of the total – up from 33% in the same period last year.
Between them they paid out £15.1 billion, up from £11.2 billion last year, with Vodafone the single largest contributor, and Royal Dutch Shell, HSBC, GSK and Cairn Energy all in in the top five.
The top 15 dividend payers paid out almost two thirds of all dividends, demonstrating the massive dependence UK investors have on only very few share for their dividend income. Overall, the top 15 accounted for 64% of total dividends paying out £26.3 billion.
The next 85 companies making up the FTSE 100 only contributed another 27% of all dividends paid, while the FTSE 250 companies accounted for just 8% in the first half.
This concentration of huge dividend payments in only a handful of larger companies clearly poses a risk for long-term dividend income investors as a company’s specific event can lead to one of the major dividend payers to cut their dividends, or stop it all together, such as in the recent past when Lloyds TSB and BP suspended their dividend payments.
Special dividends totalled £5.9bn during first half 2012
For the first half, special dividends totalled £5.9 billion, almost 2.5 times as much as the £2.3 billion paid in the first half of 2011, including the £1 billion special dividend Old Mutual paid out after its disposal of its Scandinavian interests on top of its £201 million final dividend.
GSK paid out a £277 million special dividend following the sale of its US over-the-counter medicine business, and Antofagasta made a £149 million special payment. While other, smaller, companies also made one-off payments.
Special dividends allow cash-rich companies to alleviate shareholder pressure to increase dividend pay-outs, without committing themselves into enhanced dividend policies going forward that might prove unsustainable, mid-term.
Nevertheless and already substantiated by the following dividend announcements, Capita Registrars has upgraded its full-year 2012 forecast to £78.3 billion in total dividends, which would equate to a year-on-year rise of 15.1%. It also expects this to rise to between £79 billion and £81 billion in 2013.