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Dividends set for slow recovery

Source: Reuters - Mon 26th Apr 2010

British companies paid out less in dividends in the first quarter than the same period a year earlier, Capita Registrars said, cutting its forecast for full-year dividend growth.

UK firms paid out 13.6 billion pounds in dividends during the first three months of 2010, down 2.5 percent on the same period a year ago, Capita Registrars said in a report released on Monday.

Heavyweights reducing their payouts were a major factor in the fall, with bank HSBC cutting 670 million pounds, and oil giants BP and Shell paying out 330 million less between them.

Shell's dollar-denominated payout was up 5 percent on last year, while BP's dividend was the same in dollars, but a stronger pound reduced the sterling payout.

"Even very strong performance from the rest of UK plc will make it difficult to make up for weakness at the top - as a result we expect the recovery in dividends to take longer than we had initially forecast" said Paul Taylor, head of dividends at Capita Registrars.

Capita Registrars, a unit of Capita Group that provides share registration, has downgraded its full-year forecast for UK dividends in 2010 to 59.2 billion pounds, up just 1.3 percent from 2009. In January, it had forecast 5 percent growth.

Capita Registrars said it was the slowest annual rate of decline since the recession began and 186 companies paid a dividend between January and March, up from 161 a year ago.

A total of 102 companies increased or reinstated payments, against 56 cutting or cancelling them.

However, it said a number of special factors had combined to limit the fall to 2.5 percent.

This included Cadbury paying a 133 million pound dividend in February, the last one before it was taken over by Kraft Foods, and Unilever switching to quarterly dividends and paying out 240 million pounds in the first quarter.

Capita Registrars' Taylor also said some smaller companies may have brought forward their payments to the 2009/10 tax year, which ended on April 5, to beat a tax hike. On April 6, the UK rate of income tax for higher earners rose to 50 percent from 40 percent.

Adjusting for these one-offs, dividends were down 7 percent in the quarter, Capita Registrars said.

The FTSE 100 performed poorly compared with the midcap FTSE 250, Capita Registrars said.

Payments from blue chips fell 8 percent after adjusting for one-offs, while the midcaps paid out 2 percent more. The FTSE 100 yielded 4 percent in the quarter, while the FTSE 250 yielded 3.4 percent.

British companies paid out less in dividends in the first quarter than the same period a year earlier, Capita Registrars said, cutting its forecast for full-year dividend growth.

UK firms paid out 13.6 billion pounds in dividends during the first three months of 2010, down 2.5 percent on the same period a year ago, Capita Registrars said in a report released on Monday.

Heavyweights reducing their payouts were a major factor in the fall, with bank HSBC cutting 670 million pounds, and oil giants BP and Shell paying out 330 million less between them.

Shell's dollar-denominated payout was up 5 percent on last year, while BP's dividend was the same in dollars, but a stronger pound reduced the sterling payout.

"Even very strong performance from the rest of UK plc will make it difficult to make up for weakness at the top - as a result we expect the recovery in dividends to take longer than we had initially forecast" said Paul Taylor, head of dividends at Capita Registrars.

Capita Registrars, a unit of Capita Group that provides share registration, has downgraded its full-year forecast for UK dividends in 2010 to 59.2 billion pounds, up just 1.3 percent from 2009. In January, it had forecast 5 percent growth.

Capita Registrars said it was the slowest annual rate of decline since the recession began and 186 companies paid a dividend between January and March, up from 161 a year ago.

A total of 102 companies increased or reinstated payments, against 56 cutting or cancelling them.

However, it said a number of special factors had combined to limit the fall to 2.5 percent.

This included Cadbury paying a 133 million pound dividend in February, the last one before it was taken over by Kraft Foods, and Unilever switching to quarterly dividends and paying out 240 million pounds in the first quarter.

Capita Registrars' Taylor also said some smaller companies may have brought forward their payments to the 2009/10 tax year, which ended on April 5, to beat a tax hike. On April 6, the UK rate of income tax for higher earners rose to 50 percent from 40 percent.

Adjusting for these one-offs, dividends were down 7 percent in the quarter, Capita Registrars said.

The FTSE 100 performed poorly compared with the midcap FTSE 250, Capita Registrars said.

Payments from blue chips fell 8 percent after adjusting for one-offs, while the midcaps paid out 2 percent more. The FTSE 100 yielded 4 percent in the quarter, while the FTSE 250 yielded 3.4 percent.

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