Last year was a torrid one for UK plc, says City AM’s Jake Cordell. The companies in the FTSE 350 – comprising Britain’s blue-chips and mid-caps – notched up pre-tax profits of £84bn in 2015, down 38% on the previous year and the worst annual tally since 2008. Back then, the 350 earned £99bn. Sales declined for the third year in a row in 2015, falling by 10.5% to £1.64trn.
The fall was largely due to the oil, mining and financial sectors, which have been hit by the commodities slump and volatile markets. They comprise 40% of the FTSE 350’s sales. The bounce in raw-materials prices may bode well for this year, but with miners and oil firms crucial to income investors, it comes too late to prevent forecasts of a decline in UK dividends in 2016.
Global dividends on the rise
Dividends provide the lion’s share of equity returns, so it’s always worth keeping an eye on income trends. The good news is that the overall picture looks positive.
According to Henderson Global Investors, which has been monitoring 1,200 firms worldwide since 2009, global dividends edged up by 2.2% year-on-year to $218bn. For 2016 as a whole, it expects global dividends of $1.18trn, an increase of 3.3%. Its index tracking worldwide dividends since 2009 is close to its 2014 peak.
Japan, Europe and North America led the advance in the first quarter; the latter accounts for 60% of global income from shares. In the UK, however, payouts declined by 5% year-on-year in dollar terms, due to the pound’s weakness against the greenback. On an underlying basis they climbed by 0.7%.
This year, too, will be a struggle for dividend seekers in the UK, thanks to the heavy weighting of the ailing commodity and banking sectors. Cuts announced by these industries “will bite deeper later in the year”, Ben Lofthouse of Henderson told the Financial Times.