UK investors bag record dividend haul

It has been a bumper year for dividends. New data from Capita Registrars claims dividend payouts hit almost £68bn in 2011. Total gross dividends climbed 19.4% for the full year, helped by a 26% surge in Q4.

And special dividend pay-outs were sharply on the climb too. So why the sudden dividend bump? And do dividends really matter that much?

More good news

Firstly, BP returned to the dividend fold, returning £1.8bn more in 2011 compared to 2010 following its disastrous oil spill. A large rash of special dividends were also dispensed in 2011. In fact, special dividends - special pay-outs following, typically, a cash-generating deal - multiplied four-fold, thanks to shareholder cash being returned from Antofagasta (£600m) and International Power (£2.2bn) to name but two.

Other big names include Vodafone which will likely see the IT player overtake Shell as the UK's top dividend payer, paying close to 10% of all UK dividends. And there's more dividend good news to come. Capita reckons UK stock market investors may see a 11% rise in dividends - provided the eurozone crisis does not leak confidence further.

Dividends are your mates

"Expanding dividends mean the yield on equities looks remarkably attractive at present, although there are clearly risks to capital in holding shares, as with many other comparable asset classes," says Capita Registrars' Charles Cryer. "Special dividends have been the icing on the cake for 2011, and look likely to sweeten investors' returns again in the coming year."

However, it's not all positive news. Both Thomas Cook and HMV slashed pay-outs this year following extremely tough trading. But they're in the minority.

Bear in mind the importance of dividends, long term. Resist the temptation of a company cheque, if you can. Though useful, your investment will grow faster if dividends are automatically reinvested. It's thought that, over time, capital appreciation is often worth 50% of overall returns - the other 50% is down to dowdy dividends. Not so dowdy, then.
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