By continuing to use this site you consent to the use of cookies on your device. Find out more about our cookie policy and the types of cookies we use by clicking here

Mining Stocks Boost UK Dividend Pay-outs by £3bn

Miners more than trebled their dividend payments compared to 2016, while travel and leisure stocks doubled pay-outs to UK investors

David Brenchley 26 October, 2017 | 3:05PM

After a bumper first half for dividend payments, investors in UK companies profited once again in the third quarter, data released this week shows.

The £28.5 billion paid by UK plc to shareholders in the third quarter of 2017, a year-on-year growth rate of 14.3%, was the third best quarter on record, the latest Capita Dividend Monitor found.

The total “confounded expectations of a slowdown on the rapid levels seen in the first half”, Capita said. It’s hiked estimates for total full-year 2017 headline dividends by £3 billion to £94 billion, up 11.1% year-on-year. The first half was particularly strong thanks to sterling’s devaluation. Strip that positive effect out, and full-year underlying growth is 8.5%. Special dividends rose two-fifth to £1.5 billion.

The exchange rate tailwind waned in Q3 and Justin Cooper, chief executive of Shareholder Solutions, suggests that’s likely to be the case for the remainder of 2017 and beyond. Investors will get more of a feel for Capita’s expectations for 2018, which will get a boost from Tesco (TSCO) reinstating its dividend this month, in December. Cooper expects the overall value next year should remain at record levels.

Best and Worst Sectors

Miners accounting for two-thirds of year on year increase, more than tripling from the £921 million paid in Q3 2016 to £3.36 billion this time around.

Both Rio Tinto (RIO) and BHP Billiton (BLT) scrapped their progressive dividend in favour of paying out a set ratio of profits, decisions Morningstar analyst Matthew Hodges backs.

Revenues at the Anglo-Australian pair are booming, allowing Rio to double its payout year-on-year and BHP to triple its. Despite this, Hodge considers both stocks overvalued and as a result they hold a a two-star rating.

The travel and leisure sector doubled its total year-on-year, thanks mainly to a £960 million special dividend from caterer Compass Group (CPG). The firm unveiled increases in profits and cash flow and, after failing to find suitable acquisition opportunities, decided to reward shareholders.

Housebuilder Taylor Wimpey (TW.) also paid a special dividend for the third consecutive year.

Beverage and food producers saw the largest decline in pay-outs, with its total falling by 81% to just £266 million. That was attributed largely to the loss of SAB Miller from the stockmarket after its takeover by AB-Inbev (ABI).

Elsewhere, IT firms and general financials – which excludes banks – saw their payments decrease by 27% and 21% respectively.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
BHP Billiton PLC1,378.50 GBX0.47
Compass Group PLC1,504.00 GBX-0.46
Rio Tinto PLC3,521.00 GBX-0.48
Taylor Wimpey PLC199.10 GBX-2.31-
Tesco PLC205.30 GBX-0.10
About Author David Brenchley

David Brenchley  is a Reporter for Morningstar.co.uk