‘Flurry of specials’ belies Brexit uncertainty for dividends

Added 18th July 2016

UK dividends grew 7.6% in Q2, to a record £28.8bn, according to the latest Capita UK Dividend Monitor.

‘Flurry of specials’ belies Brexit uncertainty for dividends

But, the firm said, this jump at a headline level was boosted by a fourfold increase in special dividends and fails to take account of the impact Brexit is likely to have on dividends going forward.

According to Capita, the weak pound seen as a result of Brexit is set to provide an exchange rate boost of £4.3bn in 2016 for UK investors.

This, it said, will go a long way to offsetting the impact of the dividend cuts seen already from some of the UK largest traditional payers.

On the back of this, the firm has increased its expectation for total underlying dividends for the year by 0.5% to £76.9bn, as any potential recessionary pressures would hit the profits and dividends of UK-focused mid-caps the hardest.

“We had previously expected them to fall 1.7% to £75.0bn thanks to all the cuts from big multinationals. If the pound continues to weaken, we will upgrade the forecast further later in the year. In addition, ever unpredictable special dividends look set to be around £2.5bn higher than we had initially pencilled in.”

Likewise, it said: “Headline dividend forecast for year have been upgraded to £82.5bn, up 3.8%, owing to additional windfall from special dividends.”

However, beneath the froth of specials and currency the underlying picture remains less exciting.

“Dividends fell 2.7% year on year to £25.2bn, in line with our pre-Brexit forecast,” the firm said, “This fall came despite a £960m exchange rate gain on dividends declared in dollars and euros as the pound weakened in the months running-up to the EU referendum.

The reason for this, the firm explained is that company profitability has been poor for a number of years. And, while dividends have held up better than profits, cover is low and growth is difficult to sustain.

Kames Income Hub


Vincent McEntegart, manager of the Kames Diversified Monthly Income Fund, explains how he aims to deliver a stable and sustainable income of 5% p.a.*, paid monthly, by investing in a range of asset classes

Square Mile Research

Matthews Asia Funds Asia Dividend
Matthews Asia Funds Asia Dividend...

Talking Factsheets is a video service for users...

Visitor's Comments Add your comment

Add Your Comment

We won't publish your address

About Author

Geoff Candy

Group digital editor

Geoff Candy joined Portfolio Adviser as News Editor in May 2014. He has been a financial journalist and broadcaster since 2005 and, in that time has worked in both South Africa and the Netherlands, covering everything from high street retailers and construction companies to mining and insurance.



Investment Strategy




PA Channel Island 2016
PA Channel Island 2016

8th November 2016
The Royal Yacht, Jersey


17th November 2016
The Andaz

PA Emerging Markets 2016
PA Emerging Markets 2016

1st December 2016
The Mayfair, London

Sponsored Content

Investment Strategy