Capita Dividend Monitor 2013

As an investor mainly focussed on income, I like to keep up to date with UK market trends and statistics relating to dividends. The quarterly reports from Capita are an excellent resource.

Capita Registrars have recently issued their report for the final quarter of 2013. The report compares dividends paid by UK companies and also looks at predictions for the coming year.

Headline dividends dipped for the first time since 2010 by 1% to £79.8bn over the 12m period. Weak company profitability has been sighted as the reason for the slow down, as companies cannot sustain rapid dividend growth against a back drop of reduced earnings.

For 2014 they now expect underlying growth to be 6.3% - down from a provisional expectation of 7%, with the most significant event of the year being the special dividend from Vodafone which is set to pay out £16.6bn.

Total dividends for the coming year are expected to exceed £100bn as a result of this huge Vodafone payout, however the underlying forecast is for a rise of 6.3% to £82.2bn.

Other trends in UK dividend payments include:

• FTSE 100 dividends outperform the FTSE 250 in 2013 on an underlying basis but look worse on a headline basis; one-off factors and special dividends explain this difference
• Top five contributed 36% of all UK dividends; top 15 made up 57%
• Industrials and consumer goods do well
• Forecast for 2014 reduced by £800m as dividend growth slows more than expected.   

Stripping out one-off events, the underlying dividend payments grew at 6.1% compared to last year. The prospective yield has fallen to 4.2% compared to 4.5% at the start of the year - this is a result of rising share prices.

Just under 90% of dividends derive from FTSE 100 companies,  in fact over one third come from just 5 dividend stalwarts - Shell, Vodafone, HSBC, BP and GlaxoSmithKline.

Some of the more consistent performers over recent years (in addition to the above) are BHP Billiton, Unilever, Imperial Tobacco, National Grid and Diageo.

The decision between equities and bonds is less clear cut then a year ago with 10 year gilts now yielding 3%, but, subject to the usual caveats, equities are still offering a distinct advantage.

I will be very happy if my dividend income rises 6% over the coming year and inflation remains at 2%!