Income funds flock to miners on hopes of dividend hikes

Fund managers are backing miners as a key income play this year, predicting the largest names in the sector will ramp up their dividend payouts after a poor first quarter.

Last week’s Capita Dividend Monitor revealed UK dividends in the first quarter of 2014 reached a record high of £30.7bn, lifted by one-off special dividends from Vodafone and others. However, dividend payouts from miners fell 18% year-on-year, from just over £1bn in the first quarter of 2013 to £832m last quarter, as low commodity prices depressed profitability. This compared to a rise of 10% between 2012 and 2013 after a commodity-driven dividend boom. BHP Billiton slipped from being the sixth best dividend payer in the UK market to seventh, behind Imperial Tobacco, as its payout fel...