Firms are on course to pay a record £88.6bn in dividends – almost double the amount shareholders got before the financial crisis erupted in 2008
Britain’s biggest firms are on course to pay a record £88.6 billion in dividends this year – almost double the amount shareholders received before the financial crisis erupted ten years ago.
Research for The Mail on Sunday shows that even though many firms are struggling to generate extra profits, they are rewarding investors with a payouts bonanza.
In 2007, just £49 billion was paid out to shareholders. This year’s record £88.6 billion will rise to £92.7 billion in 2019, analysis by broker AJ Bell shows.
Sunny outlook: Even though many firms are struggling to generate extra profits, they are rewarding investors with a payouts bonanza
Experts said the huge rise is due to ultra-low interest rates, demanding shareholders and the weak pound.
The figures, which relate to FTSE 100 companies, show they are paying out a considerably higher proportion of their spare cash to shareholders. While profits have risen 46 per cent since 2007, dividends are up 81 per cent.
Royal Dutch Shell tops the generosity league. It is set to pay dividends of more than £11 billion this year, followed by HSBC, £7.6 billion, and BP, £6 billion, in third place.
The research is likely to cause controversy, coming just days after the Archbishop of Canterbury, Justin Welby, criticised businesses for focusing on short-term profits and called for a wealth tax to create a fairer society and higher wages for working people.
AJ Bell investment director Russ Mould says: ‘We are in a low-growth economic environment and the FTSE 100 has done very little over the past couple of years, so investors are putting pressure on companies to reward them for the risk of holding their shares.’
Leading shareholders however, say that companies which pay large dividends are not short-changing workers.
‘When companies pay dividends consistently over time, it makes it cheaper and easier for them to access the stock market when they want to make investments. So paying dividends delivers long-term benefits to all stakeholders,’ said Michael Stiasny, who runs the UK Income Distribution Fund for top fund manager M&G.
The weak pound has also boosted British dividends, as many FTSE 100 companies report in dollars. Back in 2007, a dollar translated to around 50p in sterling. Today, each dollar is worth more than 76p.