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Dividend payouts to slow in 2016: Research

Investors hoping to be lured by corporates paying out a larger slice of their profits this year are likely to be be left disappointed, according to a new report by research firm Markit on Tuesday.

The financial data provider suggests some may struggle to get a decent payout in 2016 with total global dividend growth forecast to hit around 5 percent in 2016.


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In comparison, the last 4 years of dividend payout growth averaged around 9.3 percent.

Commodity slowdown

The slowdown is in part blamed on the ongoing slump in commodity prices.

"Some of the most generous payers across the world have cast payouts aside in order to cope with falling prices," said Simon Colvin, analyst at Markit in the research note.

"In Australia and U.K. aggregate dividends will actually fall from last year's total," he said.

Listed in both countries, mining company BHP Billiton is forecast to more than halve its payments in order to protect its credit rating.

Other FTSE-listed blue chips from sectors such as pharmaceuticals and banks are expected to hold payouts flat this year.


US ahead of the pack

Meanwhile, distributions from the world's biggest economy look less gloomy, according to Markit.

It expects the 500 largest U.S. firms will grow ordinary dividend payments in 2016 to $425 billion. That marks a growth rate of 6.9 percent year-on-year.

Despite outperforming other regions that number marks the lowest annual growth for five years.

Markit reports that the best performers for dividends in the U.S. will come from real estate, autos and banks.


2016 US aggregate dividends by sector - $bn

However, rising rates from the U.S. Federal Reserve may see dividend paying stocks fall out of favour.

A rising federal funds rate could make government bonds more attractive to institutional investors than dividend-paying stocks.


South Korean firms to splash cash

In Asia, South Korea is expected to be the big dividend growth story as conglomerates follow government instructions to unlock cash piles.

"This will see aggregate payments made by the country grow by 20.9 percent; over ten times the growth seen in the rest of the region," said Colvin.

Other bright spots in Asia include New Zealand, the Philippines and India.

For China, Markit tips a growth rate of all dividends to hit 5.3 percent, a rise from this year but far short of the double-digit growth recorded between 2012 and 2014.