The traditional income stocks that now look vulnerable

Year-on-year aggregate dividend growth from UK companies slowed to a sluggish 1.2% in the second quarter, according to Capita Asset Services.

Many blue chip income stalwarts with historically high yields are increasingly vulnerable to stagnating earnings and pressure on their ability to grow dividends. Take Diageo, where earnings have been lower than expected because of a slowdown in growth in emerging economies, currency volatility and pricing competition. The consensus view is the drinks manufacturer will only increase earnings by a cumulative 5% over the next two years, yet the dividend is forecast to increase faster than that in both years, which also comes off the back of a 9% rise in 2013. Ultimately that rate of divi...