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Total value of UK dividends grew by 3.6 per cent in 2019

By Marianne Curphey

Dividend growth half of 2018 figure due to high-profile cuts

Split picture: While most companies raised their dividends, some cut drastically shutterstock.com

The total value of dividends paid by UK companies grew by 3.6 per cent last year, to reach a total value of £104 bn ($135 bn, €122 bn).

However, the dividend growth was half of the previous year’s 7.9 per cent. In 2019, the majority of dividend payment companies improved their payouts, but there were also a large number of high-profile dividend cuts and several relatively large dividend payers were removed from the FTSE All Share index by corporate activity. This dampened the overall rate of growth.

The report by OLIM Investment managers found that the number of FTSE All Share constituents that cut their dividends in 2019 rose by nearly two thirds over the previous year.

Largely as a result of the rise in the dollar against the pound, the concentration of the UK market’s dividend payments has risen. In fact, 37 per cent of all dividends now come from just five companies and 51 per cent from ten companies. The report says this concentration poses a significant risk to future payments especially when the dependence on cyclical commodity businesses is considered.

2020 outlook clouded by strengthening pound

The pound has rallied strongly from its 2019 summer low point and current rates are ahead of the average for 2019 against the dollar and the Euro. The stock market still has around half of its dividends declared in either dollars or Euros, so sterling’s ongoing strength will place the record of real stock market dividend growth established since the financial crisis in danger, the report says.

Patrick Harrington, Director, OLIM Investment Managers, said: “The outlook for dividend growth in 2020 is clouded by a number of factors. In 2019 the market benefited from helpful currency movements that look set to reverse in 2020, economic conditions have weakened and several of the largest companies in the market are only maintaining payments."

He said monetary easing on a worldwide basis may help economic growth and there is the possibility of a fiscal boost to UK economic growth.

"The election of a government committed to ending the long period of Brexit uncertainty should also aid confidence in due course. Depending on currency moves it may be possible for UK companies to record another year of real dividend growth. As has been the case for a number of years, stronger dividend growth is generally being seen outside the FTSE 100.”

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