The oil and gas and mining sectors, which have long featured in the list of top dividend payers, remain in the wars. And although those sectors registered as having delivered reasonable rises in payouts in Q3 2015 (of 7.9 per cent for oil and gas and 8.7 per cent for mining), this was largely down to exchange rate factors, says dividend monitor Capita, as sterling's fall against the dollar resulted in a large currency gain for dividends paid in sterling but declared in dollars.
The bottom line is that dividends from those troubled sectors are unstable at best. Barclays is now assuming BHP Billiton will cut its dividend in half, while RBS in its much-reported "danger everywhere, sell mostly everything" note on 8 January, warned: "All those people who are long oil and mining companies thinking that the dividends are safe are going to discover that they're not safe at all.".
It's not just commodities though. Payouts from consumer services - another key dividend-paying sector - fell 31 per cent in Q3 (largely down to Tesco). And, while Lloyds Bank returned to the dividend fold, Standard Chartered was beating a retreat. Algy Hall's chart on page 28 shows the scale of the current drought.
There are things you can do. The first is to replace dividend failures with better alternatives (see our cover feature this week for how to screen out duds and where to find healthier specimens).
A good hunting ground for dividend replacements is among mid- and small-caps. Capita thinks the dividend growth rate here will continue to overtake growth in the FTSE 100 as companies exposed to the domestic economy perform better than those operating on the international stage.
Another juicy opportunity lies overseas, with the easiest access to these markets being through funds and investment trusts. If you lack the time to investigate opportunities in any sector and market, it's always worth leaning on funds and investment trusts for help. Investment trusts, in particular, have lots to offer with their low charges and ability to squirrel away up to 15 per cent of revenues for dipping into during lean times. Schroder Oriental Income (see this week's fund tip on page 43) and Artemis Global Income are two such managed funds that exploit income opportunities outside the UK. Or take a look at Unicorn UK Income - it pursues higher-risk smaller companies with strong earnings growth (see our interview with the managers on page 51) - and City of London, an equity income stalwart.
