UK dividends lag rest of world

Total dividends paid out by the United Kingdom’s companies fell 5% year on year in the first quarter of 2016, according to the latest Henderson Global Dividend Index.

UK dividends lag rest of world

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This was in contrast with the global trend, with dividends up 2.2% overall to US$218.4bn in the first quarter, an increase of $4.7bn year on year.

This pushed the index to 158.8, its highest level in a year. Japan, North America, and Europe led the way, while the UK, Asia, and emerging markets lagged behind.

Henderson noted that the downward pressures on UK dividends this year stemmed in large part from commodity and financial companies.

Adjusting for exchange rate movements, timing effects, one-off special dividends, and index changes, growth globally was 3.1%.

Exchange rates have been much more stable recently and so made a much smaller impact when translating global dividends into US dollars, Henderson noted. 

Henderson said it expects global dividends to rise 3.9% to $1.18 trillion in 2016, an underlying increase of 3.3%

The index is compiled by analysing dividends paid by the 1200 largest firms by market capitalisation.

“UK income investors are heavily dependent on oil, banks and mining companies, which together make up almost half of the country’s equity income,” said Alex Crooke, head of global equity income at Henderson. “The UK welcomed the world’s biggest mining companies to list in London during the mining boom, benefiting from the dividends they offered.”

“Now, the sharp downturn in the mining sector is hitting shareholder income hard,” Crooke continued. “In the oil sector, with Shell now comfortably the largest dividend payer in the world, investors can be thankful the UK’s oil majors have not yet succumbed to lower oil prices and cut their dividends. It’s times like these that demonstrate the risks to investors of such a heavy reliance on just one or two sectors. Thinking globally really helps diversify this risk away, not only from a sector perspective, but from a geographic one too.” 

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