Shareholders lose out in business

Shareholders in the uk

If you're a shareholder in a UK company, the chances are you saw your dividend cut last year. In fact, a new report out today says that dividend payments were cut by GBP£10 billion last year.

Capita Registrars found that UK companies paid out GBP£56.9 billion to investors in 2009, which is 15 percent less than 2008.

The report found that investors in the banking sector were among the worst hit, after the industry cut payouts by GBP£6 billion from 2008 levels.

Those hoping for growth in 2010 are likely to be disappointed too, as according the report speculates that dividends are unlikely to grow this year because of slow economic recovery.

"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," said Paul Taylor, head of dividends atCapita Registrars, who used data provided by the financial information specialists Exchange Data International to prepare the report.

Increases and losses

The report said banks which are partly state owned paid nothing to shareholders in 2009, HSBC made small reductions and Standard Chartered paid more cash to shareholders in dividends than it had in 2008.

A total of 202 listed firms cut their dividends, 74 of which paid none at all. Meanwhile 179 companies increased their payouts and 60 held them steady.

Companies whose earnings are hardest hit in a recession, such as High Street retailers, cut what they paid to shareholders by 25 percent on average,Capita Registrars reported.

Defensive firms, which make consistently steady profits, increased dividend payments by at least five percent.

Drug companies, paid 20 percent more in dividends, while electricity suppliers, food retailers and tobacco producers raised dividends by at least 10 percent, the report said.

Oil firms increased dividend payments by GBP£3 billion on the previous year, with the figures showing that BP and Shell paid a quarter of all UK dividends.

Capita points out that investors are now "heavily dependent" on just five companies - BP, Shell, HSBC, Vodafone and Glaxo­SmithKline - for 47 percent of all dividends, giving those businesses enormous clout in the investment markets and around government, the British paper The Guardian states.

The report said that over the last two years, companies have paid out GBP£123 billion in dividends, but absorbed GBP£124 billion in fund-raising to underpin their balance sheets - more than 60 percent of which went to banks, much of it from the taxpayer-funded bailouts.

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