UK Dividend Monitor Issue 32 Q4 2017
Introduction Executive Summary The latest Dividend Monitor is the first edition produced by Link Asset Services, following the acquisition of Capita Asset Services by Link Group from Capita plc. The first report of 2018, and the first as the Link Asset Services UK Dividend Monitor, provides the opportunity to look back at the record-breaking level dividends reached in 2017, and consider the year ahead. The UK stock market closed 2017 at a record high, as optimism on global growth was further strengthened by the enactment of large corporate tax cuts in the US. The UK market is predominantly composed of large multinationals, so the weak economic news at home is less important than the global picture. Economic growth supports commodity prices, and drives company profits, which provide the cash for dividends. For UK-based investors, the weakness of the pound has provided a big boost, as that cash was repatriated at favourable exchange rates. This effect is now over, and if anything, looks set to reverse a touch in the year ahead. Mid-cap companies are more exposed to the UK s weaker economic prospects. In the latest quarterly Link Asset Services UK Dividend Monitor, we consider the most recent trends in UK dividend payments, and introduce our forecast for 2018. Contents 03 Executive Summary 04 Overview 07 Special dividends & Exchange Rate Factors 08 Sectors & Companies 14 Top 100 v Mid 250 16 Yield 17 Outlook 19 Statistical Methodology Media enquiries: Teamspirit PR t: 020 7360 7878 e: LinkAssetServices@teamspirit.uk.com Produced in association with Teamspirit. The content of this article does not constitute advice and should not be relied on as such. Specific advice should be sought about your individual circumstances before any action is taken. 2 Link Asset Services UK Dividend Monitor 3 Overview Record dividends of 94.4bn were paid in 2017, up 10.5% year-on-year, boosted by large special dividends and rebounding payouts from miners Underlying dividends (ex specials) grew 10.4% to 87.7bn, the fastest rate of growth since 2012 Exchange rate gains of 2.1bn owing to sterling s 2016 devaluation boosted the annual total, though a stronger pound by year end meant FX losses in Q4 Q4 growth was the slowest quarter all year, up 1.1% Yield Prospective equity yield for 2018 is 3.5%, down 0.2 percentage points owing to strong share-price performance Sectors & Companies Mining companies accounted for half the growth in UK dividends in 2017, as formerly cancelled payouts were restored Overall, 13 sectors raised their dividends year-on-year in 2017, compared to six that saw them fall Q4 s sharp slowdown in growth reflects the greater share in the total of slow-growing dividend giants, exchange rate penalties, and some company-specific one-offs Outlook Stronger global growth is positive for UK dividends, despite UK economic weakness Top 100 likely to lag mid-caps owing to lack of growth among very large payers Lower special dividends and FX penalties on the stronger pound are likely to have an impact We expect underlying growth of 3.1%, to an underlying total of 90.4bn, equivalent to 5.0% on a constant-currency basis Headline growth, including specials, is set to be 1.6%, to a grand total of 95.9bn Top 100 v Mid 250 Top 100 beat mid-caps in 2017 in headline terms Underlying growth (ex specials) was slower for the top 100, however, despite benefiting from exchange rate gains
Overview Record dividends of 94.4bn were paid in 2017, up 10.5% year-on-year, boosted by large special dividends and rebounding payouts from miners Q4 growth was the slowest quarter all year, up 1.1% Underlying dividends (ex specials) grew 10.4% to 87.7bn, the fastest rate of growth since 2012 Exchange rate gains of 2.1bn owing to sterling s 2016 devaluation boosted the annual total, though a stronger pound by year end meant FX losses in Q4 Dividends benefited from the froth of exchange rate gains in the first half, unusually high special dividends, and a resurgent mining sector. Dividends Paid bn Q1 Q2 Q3 Q4 Full Year UK dividends UK companies paid a record 94.4bn in dividends in 2017, an increase of 10.5% year-on-year. The total comfortably surpassed the previous record set in 2014, and was even a touch ahead of our bullish 94.0bn forecast, thanks to a slightly stronger fourth quarter than we had anticipated. Dividends benefited from the froth of exchange rate gains in the first half, unusually high special dividends, and a resurgent mining sector. Other sectors showed solid, but more modest growth. Investors reaped a heavy crop of one-off special dividends, worth 6.7bn, of which almost half was down to National Grid s 3.2bn payout from the proceeds of its UK gas distribution disposal. This was the second consecutive year in which these unpredictable specials were unusually high. Underlying dividends (which exclude specials), rose 10.4% to 87.7bn in 2017, the fastest underlying growth rate since 2012. A resurgent mining sector accounted for a little under half the 8.3bn annual increase. A further quarter of this increase ( 2.1bn) was contributed by the weakness of sterling, as the large proportion of UK dividends declared in US dollars and euros was translated at more favourable exchange rates. The exchange rate gains were all enjoyed in the first half of the year, however. By the fourth quarter of 2017, the pound was markedly stronger against the US dollar compared to Q4 2016, meaning that gains turned to losses of - 480m. On a constant-currency basis, underlying dividend growth was 7.9% for the full year. In the fourth quarter, growth slowed dramatically, inching ahead only 1.1% on a headline and underlying basis to 17.0bn. This was partly down to the swing from FX gain to FX loss. More significantly, the mix of companies paying in Q4 was skewed towards those whose dividends are either growing slowly, or not at all (as we detail in the following section). We had expected no growth at all in Q4, however, so the modest increase was a pleasant surprise, and yielded a record for the fourth quarter, mainly thanks to a little extra special dividend income. This does highlight a reliance in 2017 on a relatively narrow base of companies to deliver the lion s share of growth. 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%. 2008 11.4 20.3 17.1 12.7 61.6 yoy 20% 1% 10% 7% 8% 2009 12.7 15.4 15.7 9.9 53.7 yoy 11% -25% -8% -22% -13% 2010 13.7 14.1 16.9 9.3 54.1 yoy 8.4% -8.1% 8.1% -6.4% 0.8% 2011 14.2 16.0 19.5 11.6 61.4 yoy 3.6% 13.6% 15.2% 24.8% 13.5% 2012 17.2 21.3 21.7 12.8 73.0 yoy 20.9% 32.8% 11.1% 10.5% 18.9% 2013 12.8 23.3 22.9 13.8 72.9 yoy -25.4% 9.6% 5.7% 7.3% -0.2% 2014 27.8 23.4 23.2 13.7 88.1 yoy 116.8% 0.3% 1.3% -0.4% 21.0% 2015 13.3 26.7 24.6 14.8 79.4 yoy -52.2% 14.2% 5.8% 8.3% -9.9% 2016 14.1 29.5 25.0 16.8 85.5 yoy 6.3% 10.2% 2.0% 13.4% 7.6% 2017 15.4 33.4 28.5 17.0 94.4 yoy 9.1% 13.5% 13.9% 1.1% 10.5% 2018e 15.6 33.3 29.5 17.6 95.9 yoy 1.3% -0.4% 3.3% 3.1% 1.6% 100 90 80 70 60 50 40 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018e Regular dividends Special dividends 4 Link Asset Services UK Dividend Monitor 5
Special dividends & Exchange Rate Factors Overview, continued Growth in quarterly dividends, year-on-year Percentage 40 Exchange rate boost/penalty 5.0 30 4.0 3.0 20 2.0 10 1.0 0 0.0-1.0-10 - 2.0-20 - 3.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018e -30 Rolling 12-month dividends 95.0 90.0 85.0 80.0 75.0 70.0 65.0 60.0 55.0 50.0 08Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 09Q1 12Q1 09Q2 12Q2 09Q3 12Q3 09Q4 12Q4 10Q1 13Q1 10Q2 13Q2 10Q3 13Q3 10Q4 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 11Q1 17Q4 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 Year (Qtr) 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 17Q4 18Q1e 18Q2e 18Q3e 18Q4e Special dividends Regular dividends Special dividends 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018e Year (Qtr) 6 Link Asset Services UK Dividend Monitor 7
Sectors & Companies Overall, 13 sectors raised their dividends year-on-year in 2017, compared to six that saw them fall Q4 s sharp slowdown in growth reflects the greater share in the total of slow-growing dividend giants, exchange rate penalties, and some company-specific one-offs Mining companies accounted for half the growth in UK dividends in 2017, as formerly cancelled payouts were restored Mining dividend growth certainly was startling in 2017. The total paid rose 162% to 6.6bn, revisiting the heights miners reached between 2012 and 2015. Mining dividend growth certainly was startling in 2017. The total paid rose 162% to 6.6bn, 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. Among the large payers, Glencore, Anglo American and EVRAZ restarted payments for the first time, while Rio Tinto and BHP both increased their payouts sharply. Besides utilities, which were boosted by the National Grid special, sectors that saw double-digit growth in 2017 included consumer goods and housebuilding, where the largest contributor,, paid a higher per share dividend on a much greater number of shares, following its acquisition of Reynolds American. Almost all the companies in this group paid out more year-on-year, with the housebuilders, whose profits are highly cyclical, making particularly large increases as the volumes of housing completions rose. Dividends from the property sector followed suit. Telecoms dividends rose sharply too, buoyed by the effect of the stronger euro on Vodafone, and by BT paying 10% higher per share on a larger number of shares following its EE acquisition. With its trading conditions worsening, however, BT has held its next interim flat. Meanwhile, Talk Talk is also suffering difficult trading. It halved its 2017 payout and we do not expect recovery this year. In the wider consumer services group, retail dividends were flat, but leisure dividends rose reflecting a shift in consumer spending from buying things to buying experiences. Media payouts were down, mainly owing to Sky s cancellation. Overall, 13 sectors raised their dividends year-on-year in 2017, compared to six that saw them fall. The sharp slowdown in the fourth quarter after doubledigit growth in Q3 is partly down to seasonal factors that reflect a very different mix of companies paying. In Q4, over two fifths of the 17.0bn Q4 total was contributed by HSBC, Shell and BP, all of which have frozen their dividends in US dollar terms in recent years. Other quarters see less dependence on these three giants for example, they comprise just one fifth of Q3 total. Moreover, whereas in Q4 2016, these frozen payouts were masked by exchange rate gains as the pound fell, in Q4 2017 the stronger pound meant these payments delivered a hefty exchange rate loss. In addition, there are no significant mining payouts in the final quarter, the sector whose dividend recovery set the pace for 2017, so a major growth engine was absent. Finally Sky cancelled its 360m Q4 dividend while its future ownership was in question. Among the other large sectors in Q4, industrials saw broad-based but modest growth boosted by a special from recruiter Hays, while in the consumer segment, tobacco conglomerate Imperial Brands and housebuilder Barratt delivered the latest in a succession of large hikes, with Barratt topping up its payout with a third consecutive annual special. 8 Link Asset Services UK Dividend Monitor 9
Sectors & Companies, continued Dividends top companies Rank 2007 2008 2009 2010 2011 2012 1 HSBC Holdings plc HSBC Holdings plc BP plc Royal Dutch Shell Plc Royal Dutch Shell Plc Royal Dutch Shell Plc 2 Royal Dutch Shell Plc BP plc Royal Dutch Shell Plc Vodafone Vodafone Vodafone 3 BP plc Royal Dutch Shell Plc HSBC Holdings plc HSBC Holdings plc HSBC Holdings plc HSBC Holdings plc 4 Vodafone Vodafone Vodafone GlaxoSmithKline plc GlaxoSmithKline plc BP plc Rank 2013 2014 2015 2016 2017 1 Royal Dutch Shell Plc Vodafone Royal Dutch Shell Plc Royal Dutch Shell Plc Royal Dutch Shell Plc 2 HSBC Holdings plc Royal Dutch Shell Plc HSBC Holdings plc HSBC Holdings plc HSBC Holdings plc 3 Vodafone HSBC Holdings plc BP plc BP plc BP plc 4 BP plc BP plc GlaxoSmithKline plc GlaxoSmithKline plc National Grid Plc 5 GlaxoSmithKline plc GlaxoSmithKline plc GlaxoSmithKline plc AstraZeneca plc BP plc GlaxoSmithKline plc 5 GlaxoSmithKline plc GlaxoSmithKline plc Vodafone Vodafone GlaxoSmithKline plc Subtotal bn 19.5 23.0 24.9 20.2 22.1 27.2 Subtotal bn 26.1 39.2 25.9 32.1 34.4 % of total dividends 34% 37% 46% 37% 36% 37% % of total dividends 36% 44% 33% 38% 36% 6 Barclays plc Barclays plc AstraZeneca plc 6 7 Lloyds Banking Lloyds Banking BP plc AstraZeneca plc AstraZeneca plc 7 AstraZeneca plc AstraZeneca plc AstraZeneca plc AstraZeneca plc Vodafone 8 HBOS BHP Billiton plc BHP Billiton plc International Power plc Cairn Energy 8 Rio Tinto plc Rio Tinto plc Rio Tinto plc Lloyds Banking Group plc AstraZeneca plc 9 AstraZeneca plc AstraZeneca plc Tesco plc Tesco plc BHP Billiton plc BHP Billiton plc 9 BHP Billiton plc National Grid Plc BHP Billiton plc National Grid Plc Rio Tinto plc 10 BT Group BT Group Diageo plc National Grid Plc National Grid Plc Rio Tinto plc 10 National Grid Plc BHP Billiton plc Imperial Diageo plc Lloyds Banking Group plc 11 Reed Elsevier Plc National Grid Plc Standard Chartered plc Tesco plc National Grid Plc 11 Glencore Xstrata plc Glencore plc National Grid Plc Rio Tinto plc Imperial Brands Plc 12 Aviva Plc Aviva Plc Unilever plc Diageo plc Rio Tinto plc Tesco plc 13 Diageo plc Tesco plc Standard Chartered plc Unilever plc Standard Chartered plc Standard Chartered plc 14 Tesco plc Anglo American plc Aviva Plc Rio Tinto plc Diageo plc Old Mutual plc 12 Standard Chartered plc Diageo plc Glencore plc Imperial Brands Plc Diageo plc 13 Tesco plc Standard Chartered plc Diageo plc Unilever plc Unilever plc 14 Diageo plc Unilever plc SABMiller plc BT Group BT Group 15 Royal Bank of Scotland Diageo plc Reckitt Benckiser Group Plc Imperial Unilever plc Diageo plc 15 Unilever plc Imperial Standard Chartered plc Prudential plc Compass Group Plc Subtotal bn 12.5 13.0 10.9 11.5 14.2 15.8 Subtotal bn 15.8 16.0 17.6 17.4 22.3 Top 15 Grand Total 32.0 36.0 35.8 31.7 36.3 43.0 Top 15 Grand Total 41.9 55.2 43.5 49.5 56.7 % of total dividends 56% 58% 67% 59% 59% 59% % of total dividends 57% 63% 55% 58% 60% 10 Link Asset Services UK Dividend Monitor 11
Sectors & Companies, continued Dividends by industry Industry m Resources & Commodities Consumer Goods & Housebuilding Retail & Consumer Services Banks & Financials Healthcare & Pharmaceuticals Industrials Oil, Gas & Energy Information Technology Telecoms Domestic Utilities 2007 2,722 5,485 6,926 18,121 3,999 3,511 8,781 257 4,977 2,410 57,190 2008 3,697 6,089 7,204 16,987 4,390 3,462 11,162 479 5,486 2,652 61,609 Total Dividends by sector Sector m 2016 2017 2017 v 2016 Airlines, Leisure & Travel 3,330 3,771 13% Banks 10,376 10,911 5% Beverage & Food Producers 3,409 2,310-32% Building Materials & Construction 661 779 18% yoy 36% 11% 4% -6% 10% -1% 27% 87% 10% 10% 8% Consumer Goods & Housebuilding 8,385 9,878 18% 2009 2,570 6,152 4,674 10,121 5,253 2,821 14,076 295 4,902 2,786 53,650 yoy -30% 1% -35% -40% 20% -19% 26% -38% -11% 5% -13% 2010 3,386 6,941 5,032 11,868 5,605 3,195 9,195 381 5,343 3,154 54,101 yoy 32% 13% 8% 17% 7% 13% -35% 29% 9% 13% 1% 2011 5,783 7,699 6,101 10,564 5,997 3,641 10,573 438 5,651 4,945 61,393 yoy 71% 11% 21% -11% 7% 14% 15% 15% 6% 57% 13% 2012 6,763 8,288 6,691 14,908 6,349 4,157 13,849 463 7,733 3,819 73,019 yoy 17% 8% 10% 41% 6% 14% 31% 6% 37% -23% 19% 2013 7,103 9,228 7,044 15,080 6,267 4,901 12,808 594 6,060 3,767 72,851 yoy 5% 11% 5% 1% -1% 18% -8% 28% -22% -1% 0% Domestic Utilities 3,784 6,958 84% Food & General Retailing 2,383 2,443 3% General Financials 2,770 2,944 6% General & Life Insurance 5,245 4,920-6% Healthcare & Pharmaceuticals 8,359 7,419-11% Industrial Chemicals 810 392-52% Industrial Goods & Support 5,552 5,740 3% Information Technology 629 450-28% Media 3,435 2,612-24% Mining 2,525 6,621 162% Motor Manufacturing & Parts 150 155 3% Oil, Gas & Energy 17,025 18,510 9% Property 1,887 2,260 20% Telecoms 4,751 5,332 12% 2014 6,758 9,735 7,819 15,693 6,349 5,254 12,754 605 19,252 3,930 88,147 yoy -5% 5% 11% 4% 1% 7% 0% 2% 218% 4% 21% 2015 7,176 11,223 7,226 18,809 6,602 5,775 13,840 584 4,444 3,762 79,440 yoy 6% 15% -8% 20% 4% 10% 9% -3% -77% -4% -10% Concentration of dividend payments among UK companies 2017 2016 3,336 11,944 9,148 20,278 8,359 6,214 17,025 629 4,751 3,784 85,469 yoy -54% 6% 27% 8% 27% 8% 23% 8% 7% 1% 8% 2017 7,012 12,343 8,827 21,035 7,419 6,519 18,510 450 5,332 6,958 94,405 yoy 110% 3% -4% 4% -11% 5% 9% -28% 12% 84% 10% Top 5 36.4% Next 10 23.6% The rest 40.0% 12 Link Asset Services UK Dividend Monitor 13
Top 100 v Mid 250 Top 100 v Mid 250 annual growth per quarter Percentage 70 Mid 250 Top 100 50 Underlying growth (ex specials) was slower for the top 100, however, despite benefiting from exchange rate gains 30 10 Top 100 beat mid-caps in 2017 in headline terms -10-30 -50 09Q2 09Q4 10Q2 10Q4 11Q2 11Q4 12Q2 12Q4 13Q2 13Q4 14Q2 14Q4 15Q2 15Q4 16Q2 16Q4 17Q2 17Q4 Year (Qtr) In headline terms, which include special dividends, the top 100 beat the mid-caps in 2017, with growth of 10.8% compared to 8.8%. Excluding specials, which fell sharply among the mid-caps, the situation is reversed: underlying growth among the mid-caps was 14.6%, compared to 10.0% for the top 100. On a constantcurrency basis, the gap was even wider, since almost all the exchange rate gains were enjoyed by the top 100. With some of the very largest companies having frozen their payouts, growth is easier to come by lower down the rankings. The top 100 made up a little under nine tenths of the total, the mid-caps just over one tenth. The small caps accounted for only 1 in every 50. Moreover, there was no easing of the dependence on a handful of big companies for equity income in the UK the top 15 continue to account for fully three fifths of all UK dividends in 2017, while the top five made up almost two fifths. 2017 Share of UK dividends Top 100 86.3% Mid 250 11.5% The rest 2.2% With some of the very largest companies having frozen their payouts, growth is easier to come by lower down the rankings. 14 Link Asset Services UK Dividend Monitor 15
Yield Outlook Stronger global growth is positive for UK dividends, despite UK economic weakness Top 100 likely to lag mid-caps owing to lack of growth among very large payers Prospective yield for 2018 is 3.5%, down 0.2 percentage points owing to strong share-price performance Over the course of 2018, we expect the UK market to yield 3.5%, excluding the effect of any future special dividends. This is 0.2 percentage points lower than in our last report, and reflects the increase in share prices to new highs at the end of 2017. The top 100 will yield just under 3.7%, while the mid-caps will collectively yield a little under 2.6%. A rise in bank rate, the first in over a decade, did nothing to dent the attractiveness of equities for income compared to other asset classes. In fact, the UK s tenyear gilt yield fell a little, dropping to 1.3%, while returns from savings and property yields remained unchanged. UK Income Q4 2017 Percentage 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Top 100 Mid 250 10-year UK gilts (source FT) Instant access savings (source Moneyfacts) Residential Property (source LSL Property Services PLC less costs) Lower special dividends and FX penalties on the stronger pound are likely to have an impact Stronger global growth is certainly positive for UK dividends, even as the UK itself slips to the bottom of its peer group s economic rankings. The UK s large multinationals benefit directly as their global operations flourish, while many smaller companies with export markets can exploit stronger demand abroad to compensate for flagging performance at home. Some sectors are naturally much more vulnerable than others, however, so we would expect to see some divergence in the year ahead. Headline growth, including specials, is set to be 1.6%, to a grand total of 95.9bn We expect underlying growth of 3.1%, to an underlying total of 90.4bn, equivalent to 5.0% on a constant-currency basis 300m in exchange rate losses over the subsequent 12 months. A fall in the pound of a similar magnitude produces a similar gain. If the pound simply maintains its current exchange rate against the US dollar and the euro ($1.35 and 1.11 at the time of writing), the 2.1bn of gains in 2017 will transform into a penalty of 1.7bn. That burden will fall mainly on the three largest dividend payers, which account for three fifths of the entire exchange rate effect on UK payouts. Only a small fraction falls outside the top 100 at all. A rise in bank rate, the first in over a decade, did nothing to dent the attractiveness of equities. At the underlying level we expect the top 100 will continue to lag their mid-cap counterparts, mainly because of the considerable drag caused by the absence of growth among the very largest payers. Overall, growth will be slower in 2018, mainly because the big rebound caused by the mining sector will not be repeated. We expect underlying growth on a constantcurrency basis of 5.0% for 2018. Exchange rates are impossible to forecast in the short term, but UK dividends are rather sensitive to them: every 1c the pound gains against the US dollar, if it is sustained, creates an additional penalty of approximately Adding the exchange rate penalty to our forecast produces an underlying total for UK PLC of 90.4bn in 2018, an increase of 3.1% year-on-year. To this we must add special dividends to get the headline total. Special dividends come in two flavours. The first is where companies with more volatile earnings use them at the peak of their business cycle, so they can implement a progressive policy in their regular dividend, without being tied in to unaffordably high payments when the cycle turns against them. Companies such as Barratt, Taylor Wimpey, and easyjet have adopted this practice. In reality such companies are effectively operating the 16 Link Asset Services UK Dividend Monitor 17
Statistical Methodology Outlook, continued UK dividends 100 90 80 70 60 50 Special dividends 18 16 14 12 10 8 6 4 2 The latest version of the Dividend Monitor represents the first edition of the report produced following the acquisition of Capita Asset Services by Link Group. Under the new ownership of Link Asset Services, the methodology, historic data and analysis remain unchanged. Link Asset Services analyses all the dividends paid out on the ordinary shares of companies listed on the UK Main Market. The research excludes investment companies such as listed investment trusts whose dividends rely on income from equities and bonds. The Dividend Monitor takes no account of taxation on dividends, which varies according to investor circumstances. The raw dividend data was provided by Exchange Data International, and additional information is sourced directly from companies mentioned in the report. 40 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018e 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018e Regular dividends Special dividends payout-ratio approach, which flexes dividends with profits. The second flavour is when a corporate action such as a big disposal or a merger takes place, leaving surplus capital on the balance sheet. This is often paid out via a special dividend, and/or used to fund share buybacks. Neither is easy to forecast. 2016 and 2017 both saw very high specials, and it is reasonable to assume some reversion to the mean for future years. We therefore expect them to be lower in 2018, and have pencilled in a reduction of 1.2bn to 5.5bn. Our first headline forecast for 2018 is therefore 95.9bn, an increase of 1.6% year-on-year, considerably slower than in 2017. 18 Link Asset Services UK Dividend Monitor 19
For all other enquiries please contact: Teamspirit PR t: 020 7360 7878 e: LinkAssetServices@teamspirit.uk.com Link Asset Services is a trading name of Link Market Services Limited. Registered office: The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU. Registered in England and Wales No. 2605568. For further information, including the legal and regulatory status of this company, visit www.linkassetservices.com/ legal-regulatory-status Produced in association with Teamspirit. The content of this article does not constitute advice and should not be relied on as such. Specific advice should be sought about your individual circumstances before any action is taken. 20 Link Asset Services UK Dividend Monitor