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2018 may feel like a “hangover” after record dividends in 2017

UK dividendsUK dividends soared to a record in 2017 – but it means that lower company pay-outs predicted for this year will leave investors feeling hungover, a forecaster said.

According to ‘UK Dividend Monitor’ published by Link Asset Services, UK dividends reached £94.4 billion (€107.4 billion) in 2017, up 10.5% year-on-year and due to stronger fourth quarter performance.

2017 dividend beat both the previous record set in 2014 and Link’s £94 billion forecast, buoyed by resurgent miners, exchange rate gains, and one-off specials.

The strong UK dividend performance is in line with recent record-beating global dividend results.

The figure was boosted by a number of one-off special dividends in 2017, worth £6.7 billion, of which almost half was down to National Grid’s £3.2 billion pay out from the proceeds of its UK gas distribution disposal. It was the second consecutive year in which unpredictable specials were unusually high.

Link said it expected top 100 dividends would continue to lag their mid-cap counterparts in 2018 because of the drag caused by the absence of growth among the largest payers.

The firm forecasts slower growth in 2018, as mining dividends have almost fully recovered. Special dividends are also likely to be lower in 2018, and, if the pound maintains its current exchange rate against the US dollar and the euro, most of the exchange rate gains of 2017 will be reversed in 2018.

Justin Cooper, chief executive of Link’s market services business, said: “2018 may feel like a hangover after 2017’s excesses, as exchange gains are currently set to reverse, specials are likely to fall, and there is nothing on the horizon to match the scale of the mining bounce-back.

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