LONDON, Oct 19 (Reuters) - A slowing global economy islikely to darken the outlook for UK dividends as companies cutback to protect their balance sheets, after a record thirdquarter for shareholder payouts, a report said on Monday.
While UK dividends are still expected to grow some 3 percentin 2016, to 89.8 billion pounds ($139 billion), that will beslower than the 6.8 percent rate of growth forecast fordividends in 2015 excluding special payouts, Capita AssetServices said in the report.
Rock-bottom interest rates and a rebound for corporate cashlevels have led to a ramp-up in payouts to shareholders at atime when sluggish growth leaves few obvious places to reinvest:the third quarter of 2015 was the best on record for UKdividends, according to Capita, at 27.2 billion pounds.
They have also pushed investors to chase yield fromequities, according to Richard Hunter, head of equities atHargreaves Lansdown.
But dividends are now being squeezed, notably by a slump incommodity prices, a big factor behind an expected double-digitdrop in UK corporate profits for 2015.
Miner Glencore has already cut payouts to tackleits $30 billion mountain of debt and British supermarkets Tesco and Sainsbury have cut too.
"Profits are lower relative to dividends than at any timesince 2009, and we have seen some of Britain's biggest dividendpayers announce drastic cuts for the year to come, with theprospect of more to follow," said Capita Asset Services' JustinCooper.
That left financial companies to drive dividend growth inthe third quarter, with Lloyds Banking Group paying outspecial one-off dividends as part of a plan.
Investors were also upbeat on British housebuilders, whichhave been busy addressing a housing shortage in the UK.
Housebuilder Taylor Wimpey doubled its dividendpayout in March, while estate agent Foxton's said inAugust it would pay a special dividend after a rise infirst-half core earnings.
Some investors warned against the highest-yielding stocks onthe FTSE 100, however, which tend to be miners. AngloAmerican yields 9.4 percent and BHP Billiton yields 8.1 percent. Oil companies Royal Dutch Shell andBP both yield over 7 percent.
"Going for high yields risks getting (you) sucked into avalue trap," Malcolm Bracken, investment manager atRedmayne-Bentley, said. "They look very, very cheap, but that'ssimply because the forecasts haven't caught up with reality."($1 = 0.6460 pounds) (Reporting by Kit Rees; Editing by Lionel Laurent/RuthPitchford)
