‘Unexpected’ dividend growth post-Brexit vote

Stockmarket-Performance-Business-700x450Dividend forecasts for UK blue-chip companies have increased over the past three months helped by the weakness of the pound, research from AJ Bell shows.

The platform says total FTSE 100 distributions are forecast to rise by 8 per cent this year and 5 per cent in 2017, to £72.8bn and £76.6bn respectively, excluding special dividends.

Meanwhile, AJ Bell also found that dividend cover and earning forecasts look brighter in the three months post Brexit vote.

Compared to the past two years, earnings of FTSE 100 firms are set to rise by 2017 and set to come closer to £180bn, while yields are set to increase from 3.8 per cent for 2016 to 4 per cent in 2017.

Investment director Russ Mould says: “Ultimately it is a welcome change to see estimates rising rather than falling and it will be interesting to see if this momentum can be maintained.

“The Bank of England seems unwilling to rock the boat with interest rate rises but the actual implementation of Brexit remains an unknown and relying on currency weakness alone is unlikely to work forever.

“Investors and companies are waiting to see what Brexit means when Article 50 is finally invoked, but the cagey interim period looks to be bringing an unexpected bonus to the UK’s headline stock market index.”