British dividend growth halts on strong sterling

Tim Wallace
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THE STRONG pound put an end to underlying growth in dividends last year, Henderson’s global dividend index (HGDI) showed today.

Britain had taken the lead in improvements in dividends since the financial crisis, with only the UK and Asia Pacific achieving growth in each year since the crash.

But excluding the enormous Vodafone payout, the pace of dividend growth has ground to a halt.

British distributions to shareholders hit $135.2bn (£87.8bn) in 2014, up 31.1 per cent on the year.

However, one-fifth of that came in a special dividend to Vodafone investors, and the underlying level of payouts edged up just 1.7 per cent.

The rest of Europe recorded a healthy gain in dividends, despite the Eurozone’s growing problems.

Payouts increased 12.3 per cent to $229.4bn, with an underlying increase of six per cent.

Spanish dividends boomed 24.3 per cent, while Switzerland was next at 18 per cent and the Netherlands third with growth of 9.3 per cent.

However, the recent increase in the strength of the dollar against the euro is expected to hit dividends on a dollar basis in 2015 among Eurozone countries.

Globally, dividend payouts increased 10.6 per cent on the year to break the trillion-dollar mark at $1.04 trillion.

But growth is expected to slow this year to 0.8 per cent, leaving 2015 dividends at $1.18bn.

The strong dollar and low oil price is partly behind the slowdown.

“We don’t expect developed market oil companies to reduce their dividends in 2015, but there is a strong likelihood that emerging market producers will pay out markedly less this year as their profitability comes under pressure,” said Henderson’s Alex Crooke.

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