Spectre of dividend cuts hangs over UK stocks

Managers are increasingly concerned about the future resilience of UK dividends as payouts hit record levels and a slowing economy prompts the need for companies to reallocate capital.

Investors’ escalating interest in income-paying stocks has helped push the FTSE All-Share Total Return index to an all-time high of 4,358 this month. Total dividend growth for 2012 is also forecast to reach a healthy 15%, according to Capita Registrars’ UK Dividend Monitor. But Stephen Thornber, manager of the £117m Threadneedle Global Equity Income fund, said UK dividends will be under pressure next year as companies reassess an economy not growing as fast as hoped. “If we continue to fail to see a recovery in the UK economy, dividends will come under pressure. It is on a stock-by-st...