UK dividends rose by nearly 20 per cent to hit a record £67.8 billion in 2011.

The 19.4 per cent year-on-year rise marks the first annual increase since 2008, according to Capita Registrars.

Dividend growth in the FTSE 250 index outpaced that of the FTSE 100 last year, with dividend growth from the small-cap index rising 22.8 per cent over 2011. Financials remain the largest dividend-paying sector, up 12 per cent to £13.2 billion, but mining companies are growing the fastest, according to Capita.

Going forward, Capita expects special dividends, usually paid out when a company undertakes a large corporate action such as a takeover, to boost the market ‘significantly in 2012’. It says Vodafone is likely to take the top dividend spot this year.

Capita forecasts a rise of 10.6 per cent to reach £75 billion in payouts this year, although it admits due to economic uncertainty, this year’s growth will be slower than last year.

The share registrar puts this year’s prospective yield at 4.4 per cent.

Capita emphasises the value of reinvesting dividends, saying that dividends are ‘too often overlooked’ as a return, especially ‘in a bull market when people focus overwhelmingly on capital growth’.

The group cites the latest Barclays Equity Gilt Study, which shows that £100 invested at the end of World War II with dividends reinvested would have grown to £92,460 at the end of 2008, compared to just £5,721 if dividends were not reinvested.

With regards to 2012, Capita adds that the biggest uncertainty for dividends remains the scale of the eurozone crisis.

‘A new credit crunch is well underway in the European banking system, which will have knock-on effects on the ability of banks to finance companies and consumers,’ it says.

‘Firms are at least relatively well funded this time round, so won’t face the same shock as 2008-9. Success or continued failure on the part of eurozone leaders to solve the crisis will make or break Britain’s economy this year, however, so we could quite quickly see a reversal of the recent dividend recovery.’