Meagre investment growth only due to one-off payouts
INVESTORS in British companies are experiencing lacklustre growth in dividends and have been forced to rely on one-off special payments from the top firms’ bankers and miners to boost their returns this quarter.
Underlying UK dividends grew a meagre 0.6 per cent in the third quarter, far below the 5.3 per cent growth everywhere else.
In the US, dividends have hit an alltime record rising 8 per cent, far more the global average.
The trend began in the second quarter and continued in the third.
But even at their slower pace, dividends are still growing comfortably.
Jane Shoemake, of asset managers Janus Henderson, which compiles the quarterly survey, said that a softening of the global economy had put pressure on corporate earnings and pushed down dividends in turn.
She said: “We have been cautioning investors all year that the rapid dividend growth they have enjoyed in the last couple of years was set to return to more normal levels.
“For next year, slower profit growth
will impact dividends. But with interest rates at their current low levels, equities will continue to provide a valuable source of income for investors, even if the rate of dividend growth is less eye-catching than in the recent past.”
The world’s shareholders were paid a total of $355billion (£275billion) in dividends last quarter, a 5.3 per cent boost after taking into account the strong dollar and other smaller factors.
However, there are changes that are starting to weigh on that growth.
Janus Henderson said: “A rising proportion of US companies held their dividends flat – one in six companies in the third quarter, up from one in 10 in the first – though there remain few outright cutters.” The UK’s growth was “lacklustre”, however.
Janus Henderson said: “In the UK’s case, [growth] was entirely due to very large special dividends from banks and miners.”
‘For next year, slower profit growth will impact dividends’