Weaker profits knock UK's Q3 dividends ahead of record 2014

Sun Oct 20, 2013 7:01pm EDT

* Q3 dividends down q/q for first time since 2008

* Full year dividend payouts to miss 2012 record

* Vodafone will boost next year's total above 100 bln stg

LONDON, Oct 21 (Reuters) - British companies posted lower than expected dividend growth in the third quarter, with total payouts for the year now set to be below 2012's record level, a study showed on Monday.

However a one-off windfall from Vodafone's special dividend, following the sale of its stake in Verizon Wireless to Verizon, should see the 2014 total top 100 billion pounds ($161.48 billion) for the first time since Capita Asset Services conducted its dividend monitor.

While the 25.3 billion pound payout in July to September represented a 5.7 percent increase year on year, dividends actually fell compared to the previous quarter for the first time in five years.

"We have been warning for some time that dividend growth would slow down. That slowdown has been greater than we expected on an underlying basis, and reflects a very soft patch in company profitability over the last year," Justin Cooper, CEO of shareholder solutions, Capita Asset Services, said.

Dividends have become increasingly sought after as global monetary easing has helped keep yields on bonds low, forcing investors to look for other streams of dependable income.

Equities are still set to have a yield of 4.1 percent over the next 12 months, ahead of all other major asset classes.

This attractive yield does not even take into account a bumper dividend from Vodafone, which is set to boost prospects for payouts to shareholders next year with an unprecedented 16.6 billion pound (gross) special dividend.

The payout boosts Capita Asset Services' forecast for 2014 to 101.8 billion pounds.

Even without the one-off dividend, improving profitability means 2014's total is set to beat the current record of 80.6 billion pounds, set in 2012, which this year's dividends are set to miss by 900 million pounds.