Are there too many companies paying dividends unsupported by cashflows?

The UK may have one of the highest dividend yields globally with the spread above bonds near record highs, but Blake Hutchins, portfolio manager on the Investec UK Quality Equity Income fund, asks if this could soon be under threat.

In spite of optically attractive dividend yields, however, a quality approach to income investing, one that is focused on dividend growth supported by sound business economics and free cashflow, is the strategy most likely to reward UK investors. In 2015 we saw high yielding capital intensive companies, such as Centrica, Standard Chartered and Anglos cut their dividends.   Forecasts now predict a year-on-year decline in total dividends paid out by the UK market and in February, global oil company Conoco slashed payouts to shareholders by over 60%. We expect this trend to continue a...