'Windfall tax will ruin British dividends'

Good times could be over for investors in Britain's oil giants

British company dividends are already falling behind the rest of the world before the proposed introduction of the controversial "windfall tax" on energy firms, a new report has revealed.

Global payouts to shareholders surged 11pc to a record $304bn (£241bn) in the first three months of the year, according to investment firm Janus Henderson, while dividends from British companies dropped 22pc. The fall was largely down to a special dividend issued by Tesco in the same period last year.

If special payments are excluded, payouts to shareholders of London listed firms grew 14pc in the first three months of the year, driven largely by payouts from oil and mining companies. Volatility in the commodity markets has supercharged their profits, with London’s oil giants BP and Shell boasting dividend yields of 4.3pc and 3.4pc. 

Fund managers have warned the windfall tax on oil companies would dent the stock market's appeal as a reliable dividend payer, as global oil and mining companies elsewhere maintain chunky payouts to shareholders. Globally, payouts are surging after being paused during the last two years of the pandemic, with 94pc of listed firms now maintaining or increasing dividends.

Barry Norris, who manages the Argonaut Absolute Return fund, said that it was "illogical and unfair" to punish oil companies for benefiting from volatility in the commodity market. 

"The Government should not be robbing shareholders of their profits. Frankly, it should encourage these businesses to invest in new production so the UK can improve its energy security." 

Overall, oil and mining dividends grew at the fastest pace in the first quarter, with BHP – which moved from the London Stock Exchange to Australia late last year – set to be the largest dividend payer in the world for the second year in a row. 

Janus Henderson said that it expects global miners to pay more than $100bn in dividends for the first time ever in 2022. The investment firm now forecasts that payouts overall will reach $1.54 trillion, an underlying increase of 7pc compared with last year.

However, Jane Shoemake, of Janus Henderson, warned that the outlook remained uncertain for income investors, pointing to the war in Ukraine, high energy and commodity prices, rapid inflation and rising interest rates.

“The resultant downward pressure on economic growth will impact company profits in a number of sectors,” she said. “The impact on dividends is likely to show up beyond 2022.” 

The FTSE 100 has delivered reasonable returns since the start of the year. It has fallen just 0.6pc, compared with a 10pc fall in global markets and a 19pc drop in America

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