This is a third more than in 2015 and former BG Group shareholders are expected to earn a higher dividend following Shell’s acquisition of the company in February.
The information comes from the latest Capita quarterly Dividend Monitor, which also reported that UK dividends reached £14.2 billion in the first quarter of 2016, up 6.4% year on year. But the report did come with a cautionary note that 2016 is likely to see total dividends paid decline.
This is likely to make UK investors more dependent on Shell, with the report stating that their increased dividend “will go a long way to offsetting other companies’ cuts announced in Q1. This also means UK investors are more dependent on Shell for their [dividend] income. It will contribute £1 in every £7.50 of UK dividends in 2016, compared to £1 in £10 in 2015.”
The big payers
Joining Shell at the big boys top dividend payers table in 2016 are expected to be Vodafone (VOD), BP (BP.), AstraZeneca (AZN) and GlaxoSmithKline (GSK). According to the Monitor, these top five accounted for 53% of the £14.2 billion worth of pay-outs in the first quarter of 2016, a total of £7.5 billion.
But, as with anything in the investment world, past performance isn’t always a true reflection of future results.
Big cuts mask overall solid sector optimism
A total of 35 sectors saw dividends rise in the first quarter of this year whereas only four sectors saw falls; this is the best ratio in almost three years. It suggests that there are opportunities in each of the sectors, even though some of the ‘big players’ are making cuts to their dividends.
“Since our January report, BHP (BLT), Rio Tinto (RIO), Barclays (BARC), Rolls Royce (RR.) and Morrison (MRW) have joined Glencore (GLEN), Standard Chartered (STAN) and Anglo American (AAL) in cutting their dividends in 2016,” said Justin Cooper of Capita. “Together they will knock some hefty bricks out of the dividend wall this year.”
It is thought that the cuts will amount to a loss of £2.7 billion in pay-outs, and will filter through to shareholders later this year.
Difficult to bank on a guaranteed dividend
Financials, and banks in particular, have had a rocky ride of late and despite the likes of Standard Chartered cutting their dividend, the sector as a whole has room for optimism. Speaking of the Capita report, the fund managers at Schroders believe ruling out banks at this point might be hasty:
“Turning to the banks, slowing global growth and increased deflationary pressures have fed a low and flattening yield curve leading to cuts to bank profitability.
“Nonetheless bank dividends, in sterling terms, are still expected to grow in aggregate this year though we caution that unless economic growth expectations stabilise there could be more cuts to come.
“The only major bank to contrast with this theme is Lloyds Banking Group (LLOY) whose management indicated significant dividend growth is likely for the coming years – only time will tell if management are right.”
If you want to know about all the ex-dividend announcements coming up, take a look at our Week Ahead article, published every Friday.
To make the most of any dividend paying stocks you have, don’t forget to set up dividend reinvestment on your account.
The views in this article are based on the Capita Dividend Monitor and do not represent the views of TD Direct Investing.
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