UK dividends fall 5% in Q1 against global trends

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UK dividends fell 5 per cent to $16.4bn for Q1 this year, in contrast to the global trend, which saw dividends rise 2.2 per cent to $218.4bn, according to the latest Henderson Global Dividend Index.

This translated into 0.7 per cent underlying growth in the UK, largely due to the weakness of the pound, and 3.1 per cent globally.

Cuts in the commodities and banking sector are likely to see the trend continue throughout the year, the analysis of dividends from the world’s largest 1,200 companies found.

BHP, Rio Tinto, Glencore, Standard Chartered, Barclays, Morrisons and Rolls Royce are among the blue chip names that have already cut their dividend.

Globally, Swiss pharmaceutical giants Novartis and Roche delivered the largest dividends in Q1, following by Shell and Siemans. US-based Equity Residential Property Trust rounded out the top five.

Technology has almost tripled its dividends since 2009 and is expected to contribute 8 per cent to global dividends this year, compared to 5 per cent in 2009.

Alex Crooke, head of global equity income at Henderson Global Investors, says UK dividend cuts demonstrate the risks to investors of a heavy reliance on one or two sectors.

“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.

“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.”

Crooke says diversifying globally can reduce sector and geographic specific risk.

Japan saw underlying growth of 10.5 per cent, while the US and Canada saw 6.7 and 6.3 per cent respectively.

In the UK, drinks giant Diageo, foods business Tate & Lyle and telecoms company Vodafone could face dividend cuts in 2016, Canaccord Genuity Wealth Management warned earlier this year.