Most (85%) of S&P 500 companies are forecast to pay dividends this fiscal year, the highest level since 1997. The projection for S&P 500 dividend payments this fiscal year stands at $373bn. The sectors contributing the most are technology, industrial goods and services, and oil and gas.
“Overall the outlook is positive, and we forecast that 75 companies in the index will increase quarterly payments in Q4,” said Ryan Bransfield, dividend analyst at Markit.
Dividend payments across Europe (ex UK) are expected to rise by 7.7% to €196.4bn. The strongest growth is expected in Belgium (15.1%), Germany (10.4%) and Switzerland (8.1%).
“The fallout from the crisis in Ukraine is seen having the biggest impact on payments from Austrian banks Erste and Raiffeisen, which we expect will suspend dividends. As a result of Russian sanctions we have lowered dividend forecasts for almost a quarter of German index constituents in the past quarter,” said Bransfield.
French companies are expected to pay €318m less in dividends this year, mainly due to projected cuts from Vivendi (-72%) and GDF Suez.
In the UK dividends based on the basket of FTSE 350 are expected to increase by over 4% to £74.5bn. When exceptional payments are taken into account the number rises to £84.1bn, up 18% on last year (excluding Vodafone’s Capital Return).
However, the relative strength of sterling compared to the dollar will be extremely important for UK shareholders receiving dividends in pounds. In total of 53 companies in the FTSE 350 set dividends in dollars, accounting for 37% of the total projected payout.
"Negative news from incumbent supermarkets has dominated business headlines and Tesco has already announced a 75% cut in its dividend. We expect others to reduce payments as they continue to lose market share. There have also been profit warnings across other sectors raging from construction (Balfour Beatty) to Food & Beverage (Tate & Lyle and Associated British Foods)," said Bransfield.
The oil majors continue to be key providers of income from UK listed stocks. The biggest names, BP and Royal Dutch Shell, are currently offering 12 month forward yields of over 5%.