Dividends at UK-listed companies have crept up just slightly in the first quarter of 2018 to £16.7bn, as lack of growth in oil and pharmaceutical giants has dragged the total down.
Since more than two fifths of first quarter dividends were paid in dollars, the general weakening of the greenback against sterling in the first quarter also helped to suppress the total, according to Link Asset Services' UK Dividend Monitor.
The £16.7bn total was actually distorted by a £1bn "timing fillip" from British American Tobacco, which switched to quarterly payments after swallowing up Reynolds. Adjusting for this one-off, dividends actually rose just 1.2 per cent.
“Dividend growth in the first quarter was a bit disappointing when excluding one-offs," said Link's Justin Cooper.
"Merger and acquisition activity has also proven to be a double-edged sword for dividends. While Sky paid its long-awaited special dividend ahead of its likely takeover agreement with 21st Century Fox, consolidation has depressed dividends by a number of mid-cap firms.”
Removing other special payments such as the Sky dividend, the first quarter sum actually slipped year-on-year by 0.1 per cent.
However, Link added that investors should not be worried since the pound masked a "solid performance" from UK companies on a constant currency basis.
Added to that, the first quarter is dominated by a handful of large payers – many of whom, Link found, are showing little or no growth in the size of dividends.
Shell and BP have both just maintained their dividends, recovering from the oil slump, while in pharmaceuticals Astrazeneca has been experiencing pressure from patent expirations and competition and Glaxosmithkline is saving cash for acquisition plans.
Meanwhile the mining sector performed well, after driving dividends in 2017, and consumer goods companies and housebuilders also showed strength.
For the whole of the year, Link expects total headline UK dividends to rise 1.8 per cent to £96.3bn – a new record high.