This is a knockout time to be a dividend investor. UK-listed companies are throwing out dividends like boxing rivalsFloyd Mayweather and Conor McGregor throw punches. Investors are rolling with it, having just enjoyed a record quarter for dividends, with plenty more to come. The sooner you climb into the ring, the sooner you can feel their awesome wealth-building power.
Take that!
The latest dividend monitor fromCapita Asset Services shows UK Plc paid out anall-time record of 33.3bn inunderlying dividends in the second quarter of 2017, up a mighty 12.6% on a year ago. This sum was boosted by the weak pound, which thumped up the value of dividends paid in dollars and euros, but even stripping outthe currency effect, dividends still rose by 7.8%, the fastest growth in two years.
This was thanks to a killer combination of robust underlying growth, high special dividends, and those large foreign exchangegains. On the back ofthis mightyquarter, Capita Asset Services has upgraded its 2017 forecast for headline dividends to a record 90.6bn, a rise of7% year-on-year.
Thumping quarter
Too many investors underestimate the power of the dividend. On the income-rich FTSE 100, dividends will make up roughly three quarters of your total return over the longer run. Dividends are the regular quarterly or six-monthly payments that companies make as a reward for holding their stock, and they also bashoutplenty of one-off special dividends as well. Companies have just paid out underlying dividends totalling 28.6bn in onlythree months, also a comfortable record, with special payouts on top.
Specials contributed4.6bn ofQ2s total, the second-highest quarterly payout on record. This was boostedby a 3.2bn payment from National Grid, following the sale of its 61% stake in its UK gas distribution business, and 357m from resurgentLloyds Banking Group, paid on top of its 1.2bn regular dividend. In total, 20 UK companies paid specials, the second-highest in any quarter on record.
Simply smashing
Dividend growth was particularly strong in themining sector, where every company raised payouts, led byGlencore and Rio Tinto.The pace of growth may slow in the second halfof 2017, but Capita is now predicting total payouts of 90.6bn, a rise of 7% andbeating the all-time record set in 2014. Average yields are expected to be 3.7%, more than nine times the return on the average easy access savings account, which currently pays a meagre0.4%.
Justin Cooper, chief executive of Shareholder solutions, part of Capita, said: The gloves came off in the second quarter, as UK plc limbered up to deliver a knockout year in dividends. Shareholders can be thankful they had punchy special dividends and the weak pound in their corner, but improving profits have also played their part.
Fighting fit
This maysurprise someinvestors, who thoughtthe UK economy was on the ropes, thanks to political and Brexit wrangles. The slowing economy could inflict damage, but for now, dividend-paying stocks are retaining their crown aschampions of the investment world.
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