Investors pocket returns as dividends turn around

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Companies listed in Britain paid out £17.6 billion in dividends between June and September, a rise of 1.6% on last year and bringing the total for the year to date to £46.1 billion, down from £47.8 billion last time.

Excluding BP, which withdrew its shareholder payout in the wake of the Gulf of Mexico oil spill, dividends grew at their fastest rate since the first quarter of 2008 following a rise of 13%, Capita Registrars said.

The firm, which provides share registration services, expects £55.7 billion in UK dividends this year, down 5% from 2009. If BP had not cancelled its dividend the total amount British companies returned to investors would have risen 4% this year, roughly flat in real terms.

Charles Cryer, chief executive of Capita Registrars, said: "Investors can finally breathe a sigh of relief after a long and painful period of shrinking dividends. Payouts are growing again, and at a pretty rapid pace, once one-offs are taken into account."

Cryer said 2010 would still end with lower dividend payments than last year, but with BP promising to turn on the dividend taps again next year, income growth is expected to accelerate during 2011.

The report said mid-cap companies appeared to be doing much better than their larger counterparts after firms in the FTSE 250 Index increased distributions to shareholders by 33% in the third quarter, amounting to £1.4 billion.

The FTSE 100 Index cut them by 1.7% to £15.7 billion, but this represented a much slower pace of decline than seen of late. It also reversed the trend during the recession when smaller firms cut much harder than big cap stocks.