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Don’t expect another bumper year for special dividends
The amount of money paid in special dividends to UK investors could fall in 2017, according to Capita Asset Services’ latest study of shareholder rewards.
Companies on the UK stock market more than doubled the amount of money paid in special dividends in 2016 to £6.1bn. That is the second largest haul on record. Capita believes it will be hard to repeat this feat in 2017.
Special dividends are one-off payments by businesses which have no other requirement for cash that’s built up on their balance sheet. They are unpredictable in nature and should not be confused with ‘ordinary’ dividends paid by companies typically every six months.
Halfords (HFD) is the latest company to announce a special dividend, saying it will pay 10p per share in February given it has spare cash and no plans to make acquisitions.
InterContinental Hotels (IHG), GlaxoSmithKline (GSK), ITV (ITV) and Prudential (PRU) are among the large cap companies which paid special dividends in 2016.
The rewards tend to be associated with companies that have low capital expenditure requirements, such as insurers.
Special dividends can also occur when a company sells a major asset. An example being Carr’s (CARR) last year when it sold its flour milling arm.
National Grid (NG.) is to return a large chunk of cash to shareholders in the second quarter of 2017 after selling a 61% stake in its gas distribution networks. (DC)
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