U.K. Dividends Surge 18% to Record High in Second Quarter

Dividends in the U.K. grew 18 percent in the second quarter to a record high, bolstered by one-time payments from Old Mutual Plc and GlaxoSmithKline Plc.

Payouts to shareholders by British companies increased to 22.6 billion pounds ($35 billion) in the three months through June from 19.1 billion pounds in the year-earlier period, Capita Registrars said in an e-mailed statement today, citing data from Exchange Data International. The Payouts surpass the previous record of 22 billion pounds paid in the second quarters of 2007 and 2008.

Dividend disbursements have grown for six consecutive quarters, with the fastest growth coming from financial and health-care stocks, which rose 31 percent and 30 percent respectively, according to Capita. Oil and gas producers accounted for the biggest payment with total dividends of 3.3 billion pounds.

“The worsening global and domestic economic picture has not dented the enthusiasm among British firms to pay dividends,” Charles Cryer, chief executive officer of Capita Registrars said in the statement. “Cash flow is still strong, yet corporate investment is very depressed. Dividends are one destination for the large cash surpluses. Even without the record special payments, underlying dividend growth has surpassed our expectations.”

Old Mutual, the U.K.’s third-largest life insurer, returned 1 billion pounds to shareholders after the disposal of its Scandinavian interests, while Glaxo, Britain’s largest drugmaker, paid an extra 277 million pounds having sold its North American over-the-counter medicines business.

Cyclical Boost

Payouts from industries closely tied to the economy, including energy, media and finance, grew 30 percent in the first half of the year, three times as fast as the 9 percent rise in payouts from so-called defensive companies such as food, health care and mobile telecommunications.

Capita increased its U.K. dividend forecast for 2012 to a record 78.3 billion pounds from an earlier projection of 76.3 billion pounds. The increase in the forecast was said to reflect a further surge in special dividends, and also a faster underlying growth rate.

“We are more cautious about 2013 mainly because it is hard to see the magnitude of special payments being repeated, leaving regular dividends to do the heavy lifting,” said Cryer.

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