Global stock markets smashed their way to record highs in 2017 – and took investors on the ride with them.
In the UK alone, companies paid a record £94.4 billion in dividends to shareholders.
The increase shattered the previous record set in 2014 and was 10.5% up on the previous year – a rise of more than three times the rate of inflation.
The result was a blessing for investors building their wealth and the retired who rely on pensions, ISAs or investments for an income.
Special dividends played a part in totting up the final figures.
Expect a slowdown in 2018
They came to £6.2 billion, with more than half arising from The National Grid’s massive £3.2 billion bonus paid to investors.
Mining firms also boosted the total, on the rebound from a couple of poor years.
But the bad news is dividend increases slowed to 1.1% in the last quarter and the trend is expected to hang over into 2018.
According to data analysts Link Asset Services Dividend Monitor, the top 15 firms paid 60% of dividends in the year. The top three payers were Shell, HSBC and BP. These companies took the top three placings for the third year running.
Exchange rate gains were bolstered by the weak pound, but this advantage fell away in the second half of the year as the pound put a lot of the lost value back again.
Reliance on the few
“This does highlight a reliance in 2017 on a relatively narrow base of companies to deliver the lion’s share of growth.” said the report.
“Once mining companies are taken out of the picture, underlying dividend growth for the rest of UK PLC on a constant-currency basis was a more modest but nonetheless creditable 3.5%.
“Mining dividend growth certainly was startling in 2017. The total paid rose 162% to £6.6 billion, revisiting the heights miners reached between 2012 and 2015, before savage cuts were implemented to protect company cash flows in the face of falling commodity prices.”
The research also noted FTSE 100 firms beat the FTSE 250 with 10.8% growth, compared to 8.8% from the mid-caps. Highlighting currency exchange, the top 100 also outperformed the FTSE 250, enjoying almost all the benefit.