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 DIVIDENDS DOWN £10BN AS FIRMS CONSERVE CASH
Royal Bank of Scotland is one of the worst affected Monday February 8,2010 By Peter CunliffeSHAREHOLDERS in British companies have seen their dividend payments cut by more than £10billion in the past year and are increasingly reliant on earnings from the five biggest payers, according to a study out today.
Hard-pressed firms paid out £56.9billion to investors in 2009, a 15 per cent drop against the previous year as they tried desperately to conserve cash. Of companies listed on the FTSE All Share Index, excluding investment firms, 202 cut their dividends and of them a third paid nothing, 179 increas-ed payouts and 60 held them steady, said the Capita Registrars Dividend Monitor, based on information provided by Exchange Data International. The findings will take some of the shine off the big gains in share prices last year and will be a disappointment to those investors who rely on dividends as a source of income at a time when interest rates are so low. Worst affected were the banks that slashed dividends by half, paying out £6.1billion less than in 2008, Royal Bank of Scotland and Lloyds, which were bailed out by the taxpayer paid nothing, while among the others HSBC made only a modest cut and Standard Chartered increased its payout. Payments by high-street retailers fell by 62 per cent and from household goods makers by 64 per cent, while drugs companies tobacco producers, electricity suppliers and supermarkets all increased payouts. The star performers were the oil companies, which paid out £3billion more than in 2008, a rise of 26 per cent. Paul Taylor, head of dividends at Capita Registrars, said: “The recession has hit dividends particularly hard because companies have not only had to cope with falling profits but also massive pressure on their ability to finance themselves. “Preserving cash has been a top priority, easily trumping shareholders’ need for income on their investment.”
The study showed that UK investors were highly dependent on income from just five companies, with almost half of all dividends coming from BP, Royal Dutch Shell, HSBC, Vodafone and GlaxoSmithKline. They paid out 47 per cent of all dividends last year, up from 35 per cent two years previously. Capita forecasts that dividend payouts in 2010 will be £59.6billion, a 5 per cent increase. BP and Shell accounted for a quarter of last year’s total payout but Capita warned they face a squeeze in 2010. Taylor added: “Oil has fuelled the engine of dividends in the last two years. Lower oil prices, tighter refining margins, slower production growth and unfavourable currency trends have put profitability under pressure at the big oil companies and will make it tougher for them to increase their payouts to shareholders.” The amount paid out to share- holders was dwarfed by the £73billion raised from issuing new shares, particularly by the banks. Taylor said: “It’s no wonder dividend payments have collapsed. It would make little sense to pay out dividends on which most investors must pay tax only to demand the same money back as part of a rights issue.” 
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