Rising dividends will support near double-digit growth in 2012

ON UK INCOME

The outlook for UK dividends is surprisingly positive. The corporate sector responded rapidly to the downturn in 2008/2009 and focused aggressively on cash generation and enhancing balance sheets.

It is now demonstrating these improvements in the form of rising dividends which can support near double-digit growth over the next 12 months, despite the well-articulated macroeconomic risks. The past few years have clearly been a period of below trend dividend growth, but this is now improving. The UK pay-out ratio is currently only 40% against an average of 56% over the past 30 years. This positive momentum and a rising payout ratio should underpin growth for the next three years. In the current environment of high equity volatility and the consequent risk of drawdowns, the sustain...