Dividends grow by six per cent

What Investment, June, 2007

Investors in FTSE 100 companies have benefited from increased dividends across the market, according to M&G.

Research by the fund management firm showed 97 per cent of FTSE 100 companies reporting during this quarter increased their dividend payments to shareholders. M&G calculated growth of six per cent overall.

Out of 61 companies reporting between 1 January and 31 March 2007, 52 increased their dividends by five per cent or more. Growth of five to ten per cent was recorded by 19 companies and nine firms generated up to five per cent growth.

The banking, mining and media sectors showed the strongest dividend growth. For example, mining company Rio Tinto increased its payment by 30 per cent, Royal Bank of Scotland (RBS) generated a 25 per cent increase and BSkyB's increased by 20 per cent.

Richard Hughes, manager of the M&G Extra Income Fund, said he was encouraged by the figures. 'Six per cent is a healthy level of growth and above the current rate of inflation,' he explained. 'As a result, long-term shareholders are set to benefit from good returns and I expect we will see similar levels of good growth during the summer interim reporting season.'

Andrew Milligan, head of UK equities at Standard Life Investments, has also reported increased dividend payments among UK companies, thanks to a solid financial backdrop. He also mentioned RBS, but highlighted tobacco company BAT too, which recently paid out an extra 19 per cent to shareholders.