At this stage in the cycle, and in many sectors, there is continued pressure on company management to grow their dividends. There was record dividend growth in the UK in the second quarter and dividends are on track to reach a record high of close to £100bn for this year.
The benefits of weaker sterling are beginning to tail off now; more encouragingly, the main contributors to this recent growth have been mining companies who, after reining back capex and disinvesting non-core assets, have improving cashflows. Rising profits among insurance companies and banks also buoyed overall dividend growth. While dividends may be attractive for their shareholders, UK chief executives need a degree of pragmatism when signalling higher future dividends, otherwise they may end up having to cut back on capital expenditure, which may threaten the future growth of their...
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