Brexit dividends bonanza

Posted on: 21 July 2016 by 50connect editorial

Brexit was supposed to trigger economic meltdown. One month on, reports now suggest a dividend bonanza for UK companies.


Dividends from UK companies are set to be boosted by £4.3 billion this year as a result of Sterling’s Brexit devaluation, according to the latest Capita Dividend Monitor.

UK dividends rose 7.6% to a quarterly record of £28.8 billion in Q2, boosted by a spate of special payments from the likes of Lloyds Bank, Intercontinental Hotels, GlaxoSmithKline, and ITV. In all 22 UK companies paid out a special dividend in the last quarter, the highest number on record.

The only industry not to see rising dividends was basic materials, with dividends from mining companies cut in half.

Financial companies were the biggest dividend payers, with Lloyds doubling its dividend and big increases from life insurers.

However excluding special dividends, underlying dividends fell 2.7% to £25.2 billion in the second quarter. This represents weakness in some key industries in the UK stock market, such as oil and gas, mining and supermarkets. Within banking the dividend picture is split, with HSBC and Lloyds increasing dividends, Standard Chartered paying less than last year (i.e. – nothing), and RBS and Barclays flat (though Barclays will be cutting in the coming year, and RBS is also paying nothing).

Laith Khalaf, Senior Analyst, Hargreaves Lansdown, explained: ‘Dividends are an investor’s best friend, particularly with interest rates on the floor and showing no sign of picking up. In a low growth world, dividends represent one in the hand rather than two in the bush, and should be considered as a way of boosting total returns, as well as generating income.

While stock prices have risen to reflect the overseas earnings of many UK companies, existing investors can look forward to harvesting the extra payments resulting from a weaker pound. For new investors, a yield of 3.7% still looks attractive in a world where cash is yielding next to nothing, and bonds are not far behind.

The low interest environment has coincided with millions of baby boomers hitting retirement and searching for income. Combined with the new pension freedoms this is likely to lead to more retirement money flowing into the stock market, however investors do need to be willing to see their capital and income fluctuate.‘

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