UK dividends hit record high in 2011

London - British companies handed out record dividends in 2011 and will pay 11% more this year, with cellphone group Vodafone expected to deliver the most generous payout.

UK dividends totalled £67.8bn in 2011, a rise of 19.4% over 2010, helped by a huge payout by BP and a slew of special sums, a report by share registration company Capita Registrars said on Monday.

Dividends rose last year for the first time since 2008 as the number of companies starting or increasing payments outnumbered those cutting them by four to one, with financials the biggest payers and miners the fastest-growing sector.

The 2011 total and the projected 4.4% dividend yield for 2012 highlights the attractiveness of equities at a time when yields on government bonds and other assets have dipped.

"Record dividends are providing a real bright spot for investors against a very gloomy backdrop," said the chief executive of Capita Registars, Charles Cryer.

"We are optimistic dividends will make further progress in 2012, unless the eurozone sinks deeper towards collapse and leads companies to retrench at home."

Payments will reach £75bn in 2012, the Dividend Monitor report, which uses data from Exchange Data International, said, with special dividends a big contributor.

Vodafone will pay shareholders £2bn in February out of money earned from its stake in Verizon Wireless.

The world's largest mobile operator by revenue will account for almost 10% of all dividends paid in the UK in 2012, Capita said.

Special dividends totalled £2.9bn last year, a fourfold increase from 2010. Big payers included International Power, which rewarded shareholders with £1.6bn, and mining company Antofagasta, who gave back £600m.

A total of 438 British companies paid dividends in 2011, barely up from 434 in 2010; 373 firms increased, started or reinstated dividends, with 90 slashing or cancelling payments.

BP paid £1.8bn more in dividends in 2011 than the year before, when the company cancelled three dividend payments following the Gulf of Mexico oil spill. Disregarding BP's huge payment and the large amount paid in special dividends, the underlying increase in dividend payments was 12.8%.

Financials contributed £13.2bn, a 12% increase from 2010 but a third lower in cash terms than their contribution in 2007. Oil and gas companies trailed financials, accounting for one-sixth of total payments.

Dividends are unlikely to outperform 2008 dividends in real terms until 2013, Capita said.