The pressure on dividends ratcheted up this week as a major report predicted payouts would now fall below the levels reached last year.
Capita had in October estimated in its Dividend Monitor that UK shareholder payouts would be £89.9bn for 2016. This was above the £87.6bn reached in 2015, but less than a month into the new year the forecast has been cut to £86.5bn.
The 2015 headline number was already a drop of 10 per cent from 2014, although that figure was inflated by Vodafone's £16bn special dividend from the sale of its stake in Verizon Wireless.
Perhaps even more unsettling is the fact Capita analysts say they are "far less certain about the outcome for the year ahead" than they have been for several years. Average earnings and accompanying pay rates are imperilled due to the heavy weighting of the UK equity market towards resources stocks, meaning it's not difficult to appreciate Capita's bearishness.
Several large UK corporations have already slashed their pay rates for 2016, or cancelled them altogether. Around £3.4bn has already been squeezed out of the system as an increasing number of public companies opt to shore up their balance sheets. UK benchmark constituents such as Anglo American (AAL) and Glencore (GLEN) have already pulled their dividends, and with precious few signs of recovery in underlying commodity prices, it's inconceivable that more companies won't follow suit - BHP Billiton (BLT) is a particular cause for concern.
The one bright note is that increasing dollar strength should partly mitigate the fall-away in payouts, as around 40 per cent of UK dividends are paid in US currency.
