UK dividends lag the rest of the G7 having fallen precipitously since Brexit, and a further decline can be expected, a report has found.
The Henderson Global Dividend Index, which measures the progress global firms have made in paying investors an income, found UK dividends fell by 3.3% year-on-year in the second quarter of 2016, the worst performance in the G7 nations.
The fall was primarily driven by cuts in dividend payments by Barclays, Standard Chartered and Morrisons, spurred by a sharp decline in the value of sterling over the quarter. However, while headline growth was negative, the underlying dividend total of £25.8 billion (€29.89 billion) was 7.7% higher than last year, due to special dividends issued by GlaxoSmithKline and Intercontinental Hotels. Underlying growth takes currency movements, special dividends and timing changes into account.
Overall, dividends rose 1.2% globally year-on-year to £322.8 billion over the period, with UK dividends representing 10% of the total. European dividends totalled for £107.1 billion, a year-on-year increase of 1.1%.
The Netherlands had the fastest growth on the continent, and the second fastest in the world, with dividends rising 28.3%. German growth was hampered by big cuts from Deutsche Bank and Volkswagen. Austria, Belgium and Spain also experienced negative growth.
“For UK-based investors, the weaker pound means dividend income coming from abroad is suddenly worth a lot more,” said Alex Crooke, head of global equity income at Henderson Global Investors.
“Looking globally for income has not only provided UK investors with the opportunity to invest from a larger selection of companies with faster growing dividends than the UK can muster at present, it has also protected them in the short-term from the impact of the Brexit vote.”
©2016 funds europe