Dennehy says that good fund managers are already discounting cuts, such as those recently seen by both M&S and BT, even though in the context of the UK stock market they are not that significant.
He also says that although the dividend swap market looks unfavourable for dividend expectations in the years ahead as it implies cuts of 50 per cent from its peak, there are issues with these numbers which people have overlooked.
He says: “Firstly there are clear, but very technical, reasons why prices in the swaps market over-state the risks. Secondly, if the swaps market is right, it implies that by 2011 only six FTSE constituents would still be paying dividends. This is an extreme outcome which we have seen no-one suggests.”