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Bank shareholders bear brunt of 15% slump in dividend pay-outs; Warning of further slow growth means bad news for pension funds and private investors.

Byline: Si'n Barry

INVESTORS in the banking sector have been hardest hit by falling dividends, according to the latest research by Capita Registrars,.

UK companies paid out pounds 56.9bn in dividends in 2009, 15% less than in 2008. Bank shareholders alone saw their pay-outs cut by pounds 6bn.

Capita's Dividend Monitor also warned that dividends were unlikely to bounce back this year, forecasting at best 5% growth to pounds 59.6bn - spelling more bad news for pensions funds as well as private investors that rely on dividend pay-outs.

The report comes just a week after oil giants BP and Royal Dutch Shell, which together account for around 25% of all dividends paid by UK companies, froze dividends in dollar terms, meaning that payments in sterling would be reduced.

Capita found that a total of 202 listed firms cut their dividends in 2009, 74 of which made no pay-out at all.

There were 179 companies that increased pay-outs, while 60 held dividends at the same rate.

Part-nationalised banks paid nothing to shareholders last year, the report added.

It also revealed that shareholders were tapped for more cash than they were paid in dividends as firms launched rights issues and capital raisings to shore up their balance sheets.

Capita said pounds 73bn was paid out by shareholders for new equity - pounds 16bn more than was received in dividends.

The group warned that investors face a bleak 2010 for payouts as a result of the strengthening pound, as many of the UK's largest companies earn revenue overseas and will lose out in the exchange rate.

He added that payouts may be held back due to the heavy reliance on oil stocks, which are under pressure from lower oil prices, tighter margin pressures and unfavourable currency movements.

Pharmaceutical groups also account for a large chunk of investor payouts, but are battling against difficult conditions with competition hotting up from cheaper generic rivals.

GlaxoSmithKline and Astra-Zeneca have both announced job losses in recent weeks as they strive to slash costs.

Capita's report showed that the best payers for dividends in 2009 were BP, Shell, HSBC, mobile phone group Vodafone and drugs company GlaxoSmith-Kline.

The same five companies have paid out the best dividends since at least 2007, the research revealed.
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Title Annotation:Business
Publication:Western Mail (Cardiff, Wales)
Date:Feb 10, 2010
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