UK firms report bumper dividends 

Top performers revealed 

Admiral’s cut to its ordinary dividend for the first half of this year explains why the car insurer’s shares are sinking fast this morning but this is a rare blip for income-seekers, looking at the interim reporting season as a whole.

Russ Mould, investment director at AJ Bell, said: “Just under 60 FTSE 100 firms have a December year-end and therefore update investors on their first-half of trading in either July or August.

“So far, 53 members of the UK’s corporate elite have done so and only two, Pearson and Admiral have cut their interim dividend pay-out (excluding special dividends).

“Direct Line also provided a cut once special dividends are included (even if its ordinary dividend was increased substantially).

“Despite these cuts, overall FTSE 100 dividend growth excluding special dividends has reached 15 per cent at the first half stage, with results from Antofagasta, Bunzl, Persimmon and WPP still to come this month.

“Substantial increases from a handful of miners and a number of financial services plays have helped here, as has the pound’s drop against the euro and dollar, which enhanced the sterling contribution from heavyweights such as BP, Shell, HSBC and Unilever. 

“No fewer than 26 FTSE 100 firms have increased their shareholder payout by at least 10 per cent at the interim stage, the 10 highest are shown in the table below: 

CompanyInterim dividend increase
Taylor Wimpey334 per cent
Rio Tinto158 per cent
Anglo American100 per cent
Convatec100 per cent
Direct Line39 per cent
Old Mutual32 per cent
RSA32 per cent
Worldpay31 per cent
Coca-Cola Hellenic Bottling29 per cent
Rentokil Initial27 per cent

Source: Company accounts. Excludes special dividends and based on sterling-denominated figures.

“This puts the index on track to meet the aggregate consensus analysts’ estimate of a 15 per cent increase in dividend payments from the FTSE 100 for the year as a whole. 

“The total forecast dividend pay-out for 2017 of £84.7bn is enough to put the index on a dividend yield of four per cent and this may be a source of potential support for the UK stock market, as that yield beats returns on cash, the ten-year bond yield and also the 2.6 per cent headline inflation rate published on Tuesday by the ONS.

“Investors must remember though the shares come with far greater capital risk than cash or (in theory) Government bonds, as their capital value can go down as well as up.

“In addition, income-seekers need to consider the fact that forecast FTSE 100 aggregate earnings for 2017 only cover forecast dividends by around 1.6 times, when a figure of two or above would give more comfort that the payment estimates are entirely reliable – an unexpected economic downturn, for example, could lead to dividend cuts, just as it did in 2008 and 2009, rather than the growth that is currently anticipated.”

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