British company dividend payments hit a third quarter record but a sharp slowdown is looming in 2016 amid economic turmoil, experts say.
Headline dividends totalled £27.2bn in the third quarter of 2015, the highest third-quarter pay-out on record, and an annual increase of 6.8%.
At the underlying level, which strips out special dividends, the pay-out hit £25.8bn, representing a 5.9% year-on-year rise.
Shareholder services group Capita is forecasting an underlying annual total of £84.6bn, up 6.8% year-on-year and a new record.
But the 2016 outlook is worse as miners face falling commodity prices and supermarkets confront discount competition, it said.
While total annual dividend payments are still tipped to rise, Capita’s preliminary 2016 forecast is £89.8bn, a 3% year-on-year increase.
Capita said growth would slow due to £2bn of cuts from Glencore (LON:GLEN) and Asia-focused Standard Chartered (LON:STAN) and risks of more to come from commodity firms in particular.
Justin Cooper of Capita Asset Services said: "The outlook is gloomier. Profits are lower relative to dividends than at any time since 2009, and we have seen some of Britain’s biggest dividend payers announce drastic cuts for the year to come, with the prospect of more to follow."
Financials again drove UK dividend growth in 2015, with pay-outs strong across the whole sector.
A generous interim dividend from Lloyds Banking Group (LON:LLOY) was a highlight, the second payment this year, after a crisis-driven six-year hiatus.
Supermarket price wars cost shareholders dearly. Tesco’s (LON:TSCO) dividend cancellation, plus the cut from Sainsbury’s (LON:SBRY), reduced the third quarter total by £1bn.
Mid-caps continued to demonstrate dramatically faster growth compared to the top 100, as they are more insulated from negative global trends, and more exposed to UK economic improvement.
Commodity stocks also showed growth, though mostly due to the stronger dollar, but the outlook was more downbeat for 2016.
Glencore has already announced 2016 dividends will be cancelled, saving the company £1.5bn to shore up a shaky balance sheet.
Cooper said the FTSE 100 Index in particular was set to struggle.
He added: "Income investors can take comfort in the fact that equities continue to offer a very attractive yield compared to other asset classes, but with risks abounding, they should ensure they keep their portfolios well diversified.”