Markets bet on UK dividend bonanza from weak pound

* FX rate to boost sterling value of dollar earnings

* Analysts already raising UK divided forecasts

* 2014, 2015 FTSE 100 dividend futures seen as best bets

By Toni Vorobyova

LONDON, March 11 (Reuters) - Investors in UK exporters canlook forward to bigger dividend payouts over the next two yearsas a slide in sterling leaves companies with overseas earningswith more cash to return to shareholders.

Sterling is down around 9 percent against the dollar this year and with authorities showing no inclination to stopthe slide, miners, oil companies and others are able to squeezemore pounds out of profits made overseas.

UK blue chips generate around 60 percent of their revenuesoutside Europe, and the prospect of an exchange rate boost todividends positions them well to attract investors seekingalternative sources of income to replace the low returns onoffer from government bonds.

"About 43 percent of the market dividends are paid indollars, so when the dollar appreciates and sterling declinesthat clearly gives you a boost," said Simon Gergel, who headsthe European value and income team at Allianz Global Investors.

"And that doesn't include companies like GlaxoSmithKline which make most of their money overseas but pay thedividends in sterling. Their underlying operations are overseasso when sterling devalues, the underlying profitability insterling goes up."

The effect can take a little while to filter through, butmarkets are already anticipating higher payouts.

The 2014 dividend future on the FTSE 100, which allowsinvestors to make direct bets on the aggregate level of payoutsfrom the index constituents, has risen 5.1 percent in the pastmonth, in contrast to a gain of less than 2 percent inthe equivalent contract for euro zone blue chips.

The latest Reuters foreign exchange poll shows sterlingstaying around current levels versus the euro and the dollar incoming months, but analysts see a greater risk of furtherweakness than of strength.

Deutsche Bank estimates a 5 percent fall in thesterling/dollar rate would lead to a 2.2 percent rise in FTSE2014 and 2015 dividend futures through currency effect alone.

British dividend-focused exchange-traded products (ETPs)have seen $80 million of inflows so far this year and an average9.43 percent increase in net asset value, Markit data shows.

Signs of UK companies' dividend growth outstripping that ofeuro zone firms are already clear. In the first two months ofthe year, 58 percent of dividend announcements in Britain havebeen increases, against 48 percent in Europe, research fromDeutsche Bank showed.

"The culture of dividend paying in the UK is much moreembedded. Companies are much more reticent to trim dividends ona one-year basis and then bring it back, whereas in Europecompanies are much more fluid," said Gergel at Allianz.

Cheered in part by promises of higher future payouts fromthe companies themselves, including from heavyweight HSBC, analysts are also raising forecasts.

"Over the next 12 months, investors will earn 5.9 billionpounds from HSBC, depending on exchange rates, more than 600million more than over the last year. That is enough to nudgeour forecast for all UK Plc's dividends for the full year up 200million pounds to 80.6 billion," Justin Cooper, CEO of CapitaRegistrars, said in a statement.

In the past 30 days, Thomson Reuters StarMine SmartEstimatesof British dividends for this year and next have risen by 0.6percent and 0.5 percent, respectively, while those for the eurozone are down 0.2 percent and 0.4 percent.

Analysts at Goldman Sachs said they had upgraded their FTSE100 dividend forecasts after a strong dividend season and due tothe weaker pound.

"Performance remains strong and liquidity is low, but upsideon 2014/15 still looks attractive," they added in a note forecasting a potential rise of 9.0 percent and 17.8 percent,respectively, for the two dividend futures contracts.

However, the exchange rate boost to dividends is not aresult of fundamental changes to the companies' prospects sohigher payouts should not necessarily be seen as a precursor ofstronger earnings growth.

"Clearly an increase in dividend shows a lot of confidenceon behalf of the management in the strength of the company. Butwe strongly believe that you have to look deeper ... at howsustainable dividends are," said Andreas Zoellinger, co-managerof BlackRock's Continental European Income fund.

($1 = 0.6645 British pounds) (Editing by Simon Jessop and Nigel Stephenson)