Nutt says the payout ratio of earnings per share for dividends across the market currently stands at 44 per cent, far greater than earnings.
He says: “Dividend growth is far less volatile than earnings’ growth. That said, I would expect the overall level of dividend in the UK market to be down by 10 to 15 per cent in 2009. Its impact will mainly be felt by the very high-yielding funds. Approximately 70 per cent of merger & acquisition activity destroys value for shareholders. We encourage companies to pay dividends and cash payments to discourage such behaviour.”
Nutt says investors do need to be wary of dividend cuts and suggests there may be a “major casualty” among the big dividend payers this year.
He says: “Those offering yields in the region of 7 per cent are likely to come under some pressure but not all, such as the oil companies, where I think the price per barrel is likely to double by the end of the year from this point.”