London listed company dividends up 10% in first three months of 2011

Dividends paid by London listed companies rose more than 10% in the first quarter 0f 2011, lifting Capita Registrars' full year payout forecast to the highest level since 2008.

Capita Registrars, a unit of Capita Group, which registers the ownership of shares, expects 2011 payouts to reach £64.2 billion, up from a previous forecast of £63 billion, a 13.6% increase on last year's £56.5 billion.

The rise in 2011 estimates was largely due to a 92 pence per share special dividend from International Power, which helped lead to £15 billion pounds in first quarter payouts, a 10.3% increase from the same period last year.

‘2011 has got off to a very strong start, and underlying dividend growth will accelerate from here. Income investors are set to enjoy the best year since 2008, with an extra £7.7 billion flowing from UK companies into their pockets,’ said Charles Cryer, chief executive of Capita Registrars.

The last time UK companies delivered more than £60 billion of dividends was in 2008, when they paid £67.1 billion. Last year's decline was due to BP suspending three of its quarterly payments after the Gulf of Mexico oil spill.

The Thomson Reuters I/B/E/S consensus is for FTSE 100 companies to post an average 21% earnings growth in 2011, after an estimated increase of 55.6% last year, according to Thomson Reuters Datastream.

That compared with 14.7% growth for FTSE 250 companies this year after an expected 15.5% rise in 2010.

Capita Registrars said the main risks to its forecast were the extent of the impact of the fiscal squeeze on Britain's economic activity and the overseas demand for British goods and services.

‘Even though there are still uncertainties in the wider economy, the dividend recovery is very broadly based, indicating companies are much more confident in their financial position,’ Cryer said.

‘Smaller firms are much more sensitive to swings in the economic cycle, so the dramatic rise in payouts from them is a further sign of optimism,’ he added.

Nevertheless, payouts from FTSE 100 companies still accounted for 92% of first quarter dividends. Drugmaker AstraZeneca was the biggest dividend payer in the first quarter of this year, followed by mobile phone operator Vodafone, oil major Royal Dutch Shell, International Power and banking group HSBC.

Their contribution stood at £7.6 billion, or 51% of the first quarter total, Capita Registrars said.

Datastream showed hedge fund Man Group offered the highest dividend yield among FTSE 100 firms at 12.1%, followed by RSA Insurance at 6.7%, National Grid AT 6.3% and Standard Life AT 6.1%.