Dividends to rise in 2010 on 2009 cuts

Capita Registrars, which provides share registration and is a unit of Capita Group , estimated British companies would pay 59.6 billion pounds to shareholders this year -- 5 percent higher than in 2009.

British corporates cut dividends by 10 billion pounds, or 15 percent, to 56.9 billion last year, according to a report from Capita Registrars, with banks, the hardest hit by the financial crisis, slashing payouts by 6.1 billion.

"The growth (in 2010) will be tepid at best," it said.

"The banking sector is likely to make a contribution to the improvement but it will not return to dominate the dividend scene for a long time yet."

British companies also raised 73 billion pounds in new equity -- far more than the dividend payouts.

"It is no wonder dividend payments have collapsed so dramatically. It would make little sense to pay out dividends, on which most investors must pay tax, only to demand the same money back as part of a rights issue," said Paul Taylor, head of dividends at Capita Registrars.

The report said oil and gas producers, mainly BP and Royal Dutch Shell , would remain the dominant dividend payers, paying out an estimated 15 billion pounds in 2010.

The sector contributed more than a quarter of the dividend paid to investors last year, but growth may slow because of the outlook on crude prices, Capita Registrars said.

Last week, Royal Dutch Shell posted a 75 percent fall in fourth-quarter profit to $1.18 billion, while BP reported a lower than forecast 33 percent rise in fourth-quarter replacement cost profit.

BIG FIVE

Nearly half of all dividends in 2009 were paid by BP, Royal Dutch Shell, HSBC , Vodafone and GlaxoSmithKline , Capita Registrars said.

About 200 companies cut their dividend last year and more than a third of them paid no dividend, while 179 raised their payouts and 60 held them steady.

Capita Registrars said cyclical companies, which fare worse in a recession, cut their dividends by 25 percent, while defensives, which are better to withstand economic conditions, raised their payouts by 5 percent.

Nevertheless, shares in cyclical firms including miners, carmakers and financials were the darling of investors last year, rebounding sharply after being hammered in 2008 as the deterioration in the global economy stabilised.

Shares in defensives, such as drugmakers, telecoms and utilities, underperformed in 2009.

(Editing by Will Waterman)