Capita Asset Services has upgraded its dividend forecast for 2017 after London-listed companies returned a record amount of cash to shareholders in the third quarter.
Dividends in the three months to October totalled £27bn, a 13.2% improvement on the same period a year earlier.
When special dividends are included, investors shared £28.5bn, a 14.3% rise year-on-year. This was largely thanks to the £960m special payment contract caterer Compass made on top of its ordinary dividend.
A revival in commodity prices was one factor behind such a strong quarter, with miners accounting for two-thirds of the £3.6bn increase. The benefit of exchange rate gains was also a factor thanks to a weak pound.
This has led Capita to upgrade its dividend forecast for 2017 by more than £3bn to £94bn. If the firm is right, executives will return 11.1% more cash this year than they did 12 months earlier, beating the previous record set in 2014.
Despite such strong third quarter growth, Capita has retained its prospective dividend yield for the next 12 months at 3.7%. The firm expects fewer special dividends and exchange rate surprises in the final quarter.
At a time of concern among some investors that equity valuations are too high, boardrooms were confident enough to increase their shareholder returns in 12 of the 17 sectors when compared to the same period a year earlier.
BT, Rolls Royce, Lloyds Banking and Next were just some of the companies to return more of their surplus cash to shareholders in the third quarter.
But Justin Cooper, chief executive of Capita’s shareholder solutions arm, warned that while 2017 could be a record for shareholder returns, next year could be a different story.
“Exchange rate gains will be gone in 2018, unless the pound takes another jolt downwards as the Brexit talks unfold, and most of the big companies who cancelled dividends in recent years have already restarted them, so that additional sparkle will have dulled,” he said.
“Even so, the overall value distributed by UK plc is likely to remain at or near 2017’s record levels.”