Justin Cooper from Capita said: ‘At least we will see strong growth this year after a disappointing couple of years for dividend growth.’

The reasons behind these dividend rises are the recovering UK economy which is growing at its fastest pace since 2006, and the strength of the US dollar which sees a number of FTSE 350 firms make payouts in this currency, Capita said. 

The hunt for income: FTSE 100 share dividends continue to deliver the best income across asset classes, but FTSE 250 firms are growing their payouts faster

The US dollar has risen by 12 per cent compared to the pound in the first quarter, and 53 firms in the FTSE 350 pay their dividends in that currency, amounting to £33.8billion last year.

During the first three months of the year, oil companies – such as BP and Royal Dutch Shell – boosted payouts by 16 per cent, principally due to positive currency effects.

A number of other sectors did well with mining, chemicals, construction, general retailers and property among the industries that all posted double digit payouts.

The report said the healthcare and utility sectors underperformed the rising trend.

The survey added that mid cap firms in the FTSE 250 outperformed their larger FTSE 100 rivals last year growing by 7.5 per cent on an underlying basis, compared to growth of 0.7 per cent in the top flight.

Capita said this greater growth reflects the greater exposure of the mid caps, who have fewer operations abroad, to the rapidly growing UK economy. 

The dominance of the big five dividend payers continues, with the handful of biggest payers Shell, AstraZeneca, BP, Vodafone and GlaxoSmithKline making up slightly more than half of the £14.7billion paid out in the first three months of 2015.

But cyclical firms, those more exposed to the state of the economy for their fortunes, paid out as much in dividends and defensive firms. 

Dividend sources: Cyclical firms’ shares are matching defensive shares’ dividend payouts, but the top five dividend payers still account for half of all income

The outlook for dividends

The Capita UK Dividend Monitor said:

Oil

The oil sector presents an interesting picture. Oil prices may have recovered slightly from their low point, but they remain far below the level a year ago. BP and Shell have signalled an intention to maintain their dividends in US dollar terms, and compared to a year ago have actually increased them slightly, 5.3% and 4.4% respectively.

The industry is focusing on cash flow, cutting capex and costs as deeply as possible. Both will want to defend their dividends, knowing how badly investors would react to a cut. Yet Shell has introduced a scrip dividend in a move to reduce the cash outlay entailed in the dividend, offering shares in lieu of cash. Investors won’t mind this year.

After enduring cuts in sterling terms last year, they have enjoyed a 16% increase from the oil majors in the first quarter, with the rising US dollar accounting for three quarters of that growth.

Forecast: Regular dividends are tipped to rise, but special dividends will fall

Sectors on the rise: Construction, property, mining and chemicals

Rapid growth rates were repeated across a whole range of industries. Among the international sectors, mining and chemicals did well, with double digit growth rates, but it was those more domestically orientated sectors that had a more consistently strong performance.

Construction, general retailers, household goods, media, telecoms (fixed line), property, and technology sectors all posted double digit growth. Travel and leisure fell, but that was only because Easyjet did not repeat its special dividend. Excluding that factor, that sector was up too.

Sectors suffering: Healthcare, utilities and supermarkets

Healthcare and utilities notably underperformed the excellent growth rates seen elsewhere in the index. Utilities are stuck on a permanently low growth trajectory, while healthcare firms continue to suffer the effects of relatively weak sales on ageing drug portfolios.

The first quarter is the largest for healthcare dividends, accounting for almost one fifth of the quarter’s total, so the impact of their lacklustre growth will be smaller as the year progresses.

Sainsbury’s was the only supermarket to pay a dividend in Q1. It held its dividend flat year on year, but the sector’s price war is likely to have a bigger impact in future.

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