British large and mid caps are set to increase their dividend payouts by anaverage of 7 percent in the third quarter compared to last year, with the risecapped as companies seek to retain cash for future growth opportunities,research by Markit shows.
An improving macroeconomic picture should help reduce volatility in payoutscompared to previous years, but management may seek to hang on to cash in orderto stay flexible and exploit chances for growth in the future, Markit says.
"The macro picture seems to be improving with Markit's June all-sector UKPMI showing business activity growing (at) the fastest pace for over two years.However, our view is that this will not translate to significantly higherpay-outs in the near term as companies appear keen to maintain flexibility toinvest and expand," Markit says in a research note.
"The decision by Vodafone not to distribute the last dividendreceived from Verizon Wireless is a case in point."
The anticipated 7 percent rise in dividend payouts will nevertheless see theamount paid out in ordinary dividends at its highest level since 2009.
The FTSE 350 Oil and Gas sector is set to pay the most individends, totalling over 3 billion pounds ($4.46 billion), while the autossector is set to pay out the least.
"The average 9 percent increase for the [oil and gas] sector is driven byoil services companies, with a forecast step-up of 23 percent from John WoodGroup and 25 percent from Hunting," the note says.
($1 = 0.6719 British pounds)
Reuters messaging rm://alistair.smout.thomsonreuters.com@reuters.net
Hunting (HTG)
Wood Group (J) (WG.)
Vodafone (VOD)
