British dividend growth ‘lacklustre’, says asset manager

British investors are seeing lacklustre dividend growth and have been forced to rely on one-off special payments from the FTSE’s bankers and miners to boost their returns this quarter.

Underlying UK dividends grew a meagre 0.6% in the third quarter of the year, far below the global 5.3% growth.

Jane Shoemake, at 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.

“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,” she said.

Yet, in the US dividends hit an all-time record in the last three months of the year.

“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,” Ms Shoemake said.

Shareholders were paid a total of 355 billion dollars (£275 billion) in dividends last quarter, a 5.3% boost once taking into account the strong dollar, and other smaller factors.

US dividends rose 8%, far ahead of the global average.

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 asset manager said.

The UK also reached a third-quarter record, like Japan and China.

However the country’s growth was “lacklustre”, Janus Henderson said.

“In the UK’s case, this was entirely due to very large special dividends from banks and miner,” the manager said.