Tineke Frikkee, manager of the Newton Higher Income Fund says she is optimistic about the outlook for growth next year after three consecutive years of declining dividend income.
She says the UK is likely to see between eight and 22 per cent market dividend growth.
Frikkee says the growth will be driven by two main factors: movement in the US dollar/sterling exchange rate next year and BP’s dividend decision in early 2011.
She said: “Should BP reinstate its dividend at the consensus level of $0.105 per quarter, then 2011 market dividend growth is likely to be around 14 per cent.
“We believe that the company can afford this, and it would bring its dividend yield slightly higher than that of Royal Dutch Shell.
“If BP reinstates its 2011 dividend at the previous level of $0.14 per quarter then market dividend growth of around 18 per cent could be achieved.”
She also says that, as more than 40 per cent of UK dividends are declared in US dollars, any further weakening in sterling would push the dividend level even higher.