Weaker pound suppresses growth in UK dividends

Shareholders returns from UK companies grew at a slower pace than global counterparts in the third quarter, as a weaker pound held back dividend hikes.

UK companies paid 33.3 billion US dollars (£25.9 billion) to investors during the period, according to asset manager Janus Henderson.

This marked an increase of 3% in headline terms, lagging the overall global rate of 5.1%.

The subdued growth was attributed to the weaker pound and lower special dividend payouts.

British American Tobacco’s move to quarterly payments following its acquisition of Reynolds American also suppressed growth.

However, the underlying level of growth was 11.1%, beating the global level of 9.2%.

This reflected bigger payouts from the mining sector and British banks, as well as a boost to oil companies amid this year’s rapidly rising oil prices. The quarter saw BP’s first declared increase since 2014.

It comes amid a record-breaking quarter for global dividends, with payout levels at an all-time high in the United States, Canada, Taiwan and India. Chinese dividends also grew for the first time in four years.

Globally, dividends rose 5.1% to 354.2 billion US dollars.

For the full year, dividends are forecast to reach 1.36 trillion US dollars.

Ben Lofthouse, head of global equity income at Janus Henderson said: “The third quarter exceeded our expectations, but more importantly, the quality of growth was better than we expected. It came despite a negative impact from exchange rate moves and a lower level of special dividends.

“Importantly, our core underlying measure of growth was strong. 2018 may be a volatile and more challenging year for stock markets, but steady profit growth means dividends should continue to make steady progress.”