UK Sees Dividends Decline With Drop In Pound Value

November 25, 2016
UK Sees Dividends Decline With Drop In Pound Value February 27, 2019 Clive Nelson

The plunging value of pound sterling has caused a decline in dividends received by global investors in UK equities based on a recent report. The pound has been falling steadily after the British vote to exit the European Union in June 2016.

According to Henderson Global Dividend Index, dividends in the country went down by 2.9 percent in the third quarter on a year on year basis. The biggest reductions have come from mining companies like Glencore and manufacturing companies such as Rolls-Royce. Total dividends declined by 13.9 percent year-on- year in third quarter reaching $26.3 billion.

UK investors have however benefited since a portion of these dividends are paid out in dollars. The Henderson Global Dividend Index stated that with around 40 percent of UK dividends paid in US dollars, the impact of the overall decline was offset for some UK investors. Henderson has amended its expectations for 2016 dividends stating that payouts will grow by 0.9 percent on headline basis to $1.16 trillion.

Henderson Global Funds

The report has found that globally dividends declined by four percent year-on- year hitting $281.7 billion, the lowest since the second quarter of 2015. The global dividend totals were affected due to a decline in the United States which contributes to two-fifths of all dividend payouts.

In the United States, dividends fell by around seven percent in the third quarter to reach $100.4 billion because a few special and large dividends which were paid last year in the same period were not repeated. But even without these special dividends, the growth was only three percent this quarter, the slowest since the 2008 financial crisis.

Alex Crooke, head of global equity income at Henderson Global Investors said that the key trend in an otherwise lacklustre year for dividends was the decline in U.S. dividend growth. He however said that this trend was not a matter for concern.

In a statement Alex Crooke said,

The most significant trend is the reduction in US dividend growth, now at its slowest since the index started in 2009. However, we do not see this as a major cause for concern as US dividend growth had to return to a more sustainable rate after a couple of years of double-digit expansion.

Crooke stated that the strong performance of European dividends may result in it outperforming North America this year but it may not be enough to counteract weakness in other markets like China and Australia.

The victory of Donald Trump in the U.S. Presidential elections is causing investors to move out of defensive, dividend paying stocks as well as bonds, in the belief that the new administration will boost spending.

About the Author

Clive Nelson

Clive Nelson Author

Hi, my name is Clive Nelson and welcome to Traders Bible. Just to tell you bit about myself…I have been trading FX and binary options for the best part of 10 years now. After graduating with honours in economics, I began working for an investment bank in New York as an assistant trader before working my way up. After a few years, I went on to work as a broker in London, England and then eventually came back to the U.S to work in a hedge fund, where I manage $800 million of my clients’ investments. There have been times over the course of my career where I’ve had to take a hit, but I’ve accepted that losing is part of the game, it’s a learning curve. I’ve learnt from my mistakes and you don’t have to make the same errors I did. A lot of my education came from when I was a broker and this is why I’m here to tell you that Traders’ Bible offers you the foundations of how to become a great trader.

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