Kerching! The great dividend jackpot is set to pay out once more. And yet again, it is about to lavish investors with another record jackpot.
Dividends for 2017 are set to smash records after paying out an incredible £28.5bn in the third quarter alone. That’s a rise of 14.3% year-on-year, making it the largest third quarter on record (and the third-largest quarterly total ever). This was driven by a rise in special dividends, which rose two-fifths to £1.5bn, helped by Compass distributing an additional £960m. Excluding specials, dividends rose 13.2%, in spite of currency gains fading away, according to the latest dividend monitor from Capita Asset Services.
Over 2017 as a whole, investors look set to share share in an incredible £94bn jackpot, a rise of 11.1% on last year, after Capita upgraded its earlier forecasts by another £3bn. It says that equities are now the most attractive major asset class for income, which is something we at Motley Fool have been saying for years. The UK stock market is now on a prospective yield of 3.7% for the next 12 months, 10 times the amount you will get from the average savings account. Justin Cooper, CEO of Shareholder Solutions, part of Capita, said: “We had high hopes for 2017, but the dividend seam is proving even richer than we expected.”
Mining companies accounted for two-thirds of this year’s £3.6bn total increase, as commodity prices rebound after a prolonged period in the doldrums, driving mining profits higher and supplying extra cash for dividends. However, it wasn’t just the miners. Some 12 sectors out of 17 paid more in the third quarter than a year ago. Dividend heroes include Rolls Royce Group, which restored its payout, while Lloyds Banking Group drove dividend growth in the financials sector.
Retail was a mixed bag with J Sainsbury cutting its payout on a poor profit performance and Marks & Spencer Group failing to repeat last year’s special dividend. However, clothing retailer Next paid the second in series of four specials to return surplus cash to shareholders, and food wholesaler Booker Group, currently the subject of a takeover bid by Tesco, also paid a hefty special. Dividends from the oil, pharmaceutical and utilities sectors were broadly flat year-on-year.
Celebrate good times
Amid all the economic gloom, these figures are something to celebrate. Investors already have plenty to be happy about, with the FTSE 100 nearing its all-time high after a bull market run that has lasted more than eight years. It all confirms our Foolish philosophy that in the long term, a combination of stock market growth and dividend income is the surest way to wealth.
Celebrate your share of the £28.5bn jackpot, but don’t blow it. Instead, re-invest your windfall back into your stock holdings to generate further growth. That way you pick up more shares and get more dividends, which you can use to buy even more stock, which will generate even more dividends, in an endless virtuous circle. Although you could also treat yourself to a bottle of Champagne to celebrate your wise decision to invest in shares.
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Booker and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.