Investors feel the pain as dividends drop - by £10bn

2009 was even worse than expected for UK shareholders, with a £10bn drop in dividend pay-outs.

Last Updated: 18 Nov 2010

It’s been a tough couple of years for UK stock market investors, and that’s particularly evident when it comes to cash payouts to shareholders: total dividend payments by the UK’s biggest companies were down by a whopping £10bn in 2009. According to Capita Registrars, the amount distributed this year was just under £57bn – arguably better than a kick in the teeth, but still a decline of 15% on the total for the previous year. However, Capita is predicting that divis will finally begin to rise again this year (albeit by a measly 5%, due to the sluggishness of the recovery). And the overall picture wasn’t as bad as it could have been...

You won’t be surprised to learn that financial services investors were hit hardest, with banks cutting payments by £6bn from 2008 levels. The banks that are now partly state-owned predictably paid nothing whatsoever to shareholders in 2009, while HSBC also made small reductions. Only Standard Chartered bucked the trend, actually paying out more cash to shareholders than it did in 2008. Elsewhere, retail investors also suffered: after a tough year for the high street, their dividend payments were down around 25%.

But the pain wasn’t necessarily felt across the board; in fact, outside the worst-hit sectors, the picture wasn’t actually too grim. While a total of 202 listed firms cut their dividends (74 of which paid none at all), 60 kept them at the same level and 179 companies actually increased their payouts. As usual, some sectors fared better than others, with defence, drug and oil companies all shelling out more than they did last year. And the recession has certainly not proven to be a drag for investors in tobacco companies, where dividends were up by more than 10%.

As the observant among you will notice, it’s the more recession-proof industries that have continued to pay dividends to shareholders. After all, we may not be splashing out on that ‘must-have’ pair of shoes, but we still need to fill up our petrol tanks, take our prescriptions and feed that 20-a-day habit (although ideally not all at the same time).

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