Companies are disgorging unprecedented quantities of cash back to shareholders, according to the latest snapshot of dividend payments.

Dividends in the third quarter were the highest ever, reaching £23.2 billion, up 10.4 per cent, according to Capita Registrars, which today is lifting its forecast for the full year to £78.6 billion, another record. After taking account of inflation, this means that, at last, dividends will overtake the pre-crisis peak of 2008 in real terms this year.

With the economy ticking over sufficiently for companies to sustain profits but not enough to persuade them to dust off capital spending plans, the answer is to keep pushing dividends higher. Meanwhile, institutional investors - with pensions to pay - are crying out for income in the face of rock-bottom yields from gilts. "These two forces are combining to keep dividends growing strongly," Capita said.

By the end of September, British listed companies had paid out £64.6 billion this calendar year, up by 17.1 per cent compared with the same period in 2011, putting an additional £9.4 billion in investors' pockets before tax.

But although the third quarter was the seventh successive quarter of growth, there were signs the dividend splurge is starting to slow down. Capita said that the growth was the slowest since the fourth quarter of 2010.

In the quarter, special dividends were relatively subdued, amounting to only £432 million, thanks to special payments from Johnson Matthey and Severn Trent. Companies raising their dividends outnumbered those cutting them by nearly five to one. Vodafone, Royal Dutch Shell and HSBC led the dividend payers.

David Fuller's view This is a global theme and it goes a long way to explaining why many large capitalisation companies have held up quite well in recent years. (See also Eoin Treacy's frequent reviews of Dividend Aristocrats.)

However, dividends will not prevent some volatile corrective phases, such as we are now seeing on Wall Street and in some other stock markets, following the excellent early-June to mid-September rally. (See also 'The air is thinner up here' on 9th October and also last Friday's lead review.)


Stock market setbacks create buying opportunities, in proportion to the amount of worry they generate among investors. This corrective phase is likely to carry somewhat further given uncertainties regarding a close US Presidential Election featuring two ideologically opposed candidates, plus the 'fiscal cliff'. Nevertheless, the S&P 500 Index (weekly & daily) is now entering an area of support which should cushion downward risk and prevent a rout.

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