Blue Chip companies are currently paying out more than their net profits, according to data compiled from all 100 companies in the FTSE index.
The pay-out ratio for FTSE 100 companies is currently 107 percent, meaning that dividend pay-outs are exceeding the net profits. As an index, retained earnings are being used to fund dividend payments to shareholders; although this is manageable in the short term, this cannot continue in perpetuity and unless earnings increase markedly soon, the chance of dividend cuts will increase.
By studying the breakdown of pay-out ratios (below), you will see this issue is particularly prevalent for a handful of companies – investors in other companies have nothing to worry about.
The FTSE 100 is heading into overbought territory
According to the relative strength index technical indicator, the FTSE 100 is in overbought territory which is seen by some technical analysts as a sign of a potential reversal.
A reading of over 70 is classed as overbought and at the time of writing, the 20-period RSI for the FTSE 100 is 65.4.
The US is in an earnings recession
As the name suggests, an earnings recession is a reduction in the overall profit of a countries listed companies. We take the US benchmark, the S&P 500, to demonstrate how earnings are slowly deteriorating, despite a supposedly improving economy.
Notwithstanding the fact that lower earnings will ultimately lead to stagnant or reduced shareholder pay-outs, investors may increasingly concerned that the valuation of the index leaves very little room for multiple expansion at current levels and if earnings continue to fall, share prices may not be far behind.
The S&P 500 inflation adjusted Shiller PE Ratio (CAPE) is at the highest level since December according to data on Multpl.
| Name | Num shares (m) | Total Profit (m) | Dividend | Dividend Payout £m | Payout Ratio |
| 3i Group PLC | 972.73 | 824 | 20 | 194.55 | 23.61% |
| Admiral Group PLC | 281.97 | 300 | 58.7 | 165.52 | 55.17% |
| Anglo American PLC | 1,402.23 | -3,662.20 | 20.933 | 293.53 | -8.02% |
| Antofagasta PLC | 985.86 | 410.53 | 1.971 | 19.43 | 4.73% |
| ARM Holdings PLC | 1,407.44 | 339.7 | 10.54 | 148.34 | 43.67% |
| Ashtead Group PLC | 501.52 | 407.6 | 22.5 | 112.84 | 27.68% |
| Associated British Foods PLC | 791.67 | 532 | 35 | 277.08 | 52.08% |
| AstraZeneca PLC | 1,264.57 | 1,839.57 | 188.5 | 2383.71 | 129.58% |
| Aviva PLC | 4,058.19 | 918 | 20.8 | 844.10 | 91.95% |
| Babcock International Group PLC | 505.6 | 286.6 | 25.8 | 130.44 | 45.51% |
| BAE Systems PLC | 3,174.10 | 918 | 20.9 | 663.39 | 72.26% |
| Barclays PLC | 16,911.02 | -394 | 6.5 | 1099.22 | -278.99% |
| Barratt Developments PLC | 1,002.30 | 449.4 | 15.1 | 151.35 | 33.68% |
| Berkeley Group Holdings (The) PLC | 137.37 | 404.1 | 200 | 274.74 | 67.99% |
| BHP Billiton PLC | 2,112.07 | 1,214.52 | 82.275 | 1737.71 | 143.08% |
| BP PLC | 18,783.82 | -4,220.91 | 26.726 | 5020.16 | -118.94% |
| British American Tobacco PLC | 1,864.31 | 4,290.00 | 154 | 2871.04 | 66.92% |
| British Land Co PLC | 1,029.60 | 1,345.00 | 28.36 | 291.99 | 21.71% |
| BT Group PLC | 9,927.60 | 2,588.00 | 14 | 1389.86 | 53.70% |
| Bunzl PLC | 335.51 | 232.7 | 38 | 127.49 | 54.79% |
| Burberry Group PLC | 444.43 | 309.5 | 37 | 164.44 | 53.13% |
| Capita PLC | 667.04 | 52.7 | 31.7 | 211.45 | 401.24% |
| Carnival PLC | 190.44 | 1,147.02 | 72.108 | 137.32 | 11.97% |
| Centrica PLC | 5,467.08 | -747 | 12 | 656.05 | -87.82% |
| Coca-Cola HBC AG | 361.7 | 203.94 | 30.764 | 111.27 | 54.56% |
| Compass Group PLC | 1,642.96 | 869 | 29.4 | 483.03 | 55.58% |
| CRH PLC | 829.73 | 526.77 | 45.669 | 378.93 | 71.93% |
| DCC PLC | 88.76 | 178.03 | 97.22 | 86.29 | 48.47% |
| Diageo PLC | 2,517.12 | 2,244.00 | 59.2 | 1490.14 | 66.41% |
| Direct Line Insurance Group PLC | 1,375.00 | 580.4 | 13.8 | 189.75 | 32.69% |
| Dixons Carphone PLC | 1,151.46 | 161 | 9.75 | 112.27 | 69.73% |
| easyJet PLC | 397.21 | 548 | 55.2 | 219.26 | 40.01% |
| Experian PLC | 957.54 | 500.25 | 29.333 | 280.88 | 56.15% |
| Fresnillo PLC | 736.89 | 47.6 | 3.656 | 26.94 | 56.60% |
| GKN PLC | 1,714.15 | 197 | 8.7 | 149.13 | 75.70% |
| GlaxoSmithKline PLC | 4,871.83 | 8,422.00 | 80 | 3897.46 | 46.28% |
| Glencore PLC | 14,394.74 | -3,232.43 | 3.816 | 549.30 | -16.99% |
| Hammerson PLC | 791.88 | 726.8 | 22.3 | 176.59 | 24.30% |
| Hargreaves Lansdown PLC | 474.32 | 156.66 | 21.6 | 102.45 | 65.40% |
| Hikma Pharmaceuticals PLC | 239.92 | 170.1 | 21.609 | 51.84 | 30.48% |
| HSBC Holdings PLC | 19,922.11 | 8,805.17 | 34.59 | 6891.06 | 78.26% |
| Imperial Brands PLC | 958.71 | 1,691.00 | 141 | 1351.78 | 79.94% |
| Informa PLC | 648.94 | 171.4 | 20.1 | 130.44 | 76.10% |
| InterContinental Hotels Group PLC | 197.52 | 795.73 | 69.6 | 137.47 | 17.28% |
| International Consolidated Airlines Group SA | 2,120.47 | 1,087.73 | 14.513 | 307.74 | 28.29% |
| Intertek Group PLC | 161.39 | -360.5 | 52.3 | 84.41 | -23.41% |
| Intu Properties PLC | 1,344.71 | 518.4 | 13.7 | 184.23 | 35.54% |
| ITV PLC | 4,025.41 | 495 | 6 | 241.52 | 48.79% |
| Johnson Matthey PLC | 193.53 | 333.1 | 71.5 | 138.37 | 41.54% |
| Kingfisher PLC | 2,256.86 | 412 | 10.1 | 227.94 | 55.33% |
| Land Securities Group PLC | 790.68 | 1,338.00 | 35 | 276.74 | 20.68% |
| Legal & General Group PLC | 5,949.12 | 1,075.00 | 13.4 | 797.18 | 74.16% |
| Lloyds Banking Group PLC | 71,373.73 | 860 | 2.25 | 1605.91 | 186.73% |
| London Stock Exchange Group PLC | 350.3 | 328.3 | 36 | 126.11 | 38.41% |
| Marks & Spencer Group PLC | 1,624.68 | 112 | 18.7 | 303.82 | 271.26% |
| Mediclinic International PLC | 737.24 | 177 | 5.24 | 38.63 | 21.83% |
| Merlin Entertainments PLC | 1,013.91 | 170 | 6.5 | 65.90 | 38.77% |
| Mondi PLC | 485.55 | 665.74 | 40.195 | 195.17 | 29.32% |
| Morrison (Wm) Supermarkets PLC | 2,335.26 | 222 | 5 | 116.76 | 52.60% |
| National Grid PLC | 3,746.87 | 2,591.00 | 43.34 | 1623.89 | 62.67% |
| Next PLC | 147.31 | 666.8 | 158 | 232.75 | 34.91% |
| Old Mutual PLC | 4,929.47 | 614 | 8.9 | 438.72 | 71.45% |
| Paddy Power Betfair PLC | 83.71 | 108.71 | 180 | 150.68 | 138.61% |
| Pearson PLC | 821.64 | 823 | 52 | 427.25 | 51.91% |
| Persimmon PLC | 308.29 | 521.9 | 110 | 339.12 | 64.98% |
| Provident Financial PLC | 147.64 | 218.2 | 120.1 | 177.32 | 81.26% |
| Prudential PLC | 2,575.68 | 2,579.00 | 38.78 | 998.85 | 38.73% |
| Randgold Resources Ltd | 93.63 | 127.36 | 44.975 | 42.11 | 33.06% |
| Reckitt Benckiser Group PLC | 703.78 | 1,743.00 | 139 | 978.25 | 56.12% |
| RELX PLC | 1,091.20 | 1,008.00 | 29.7 | 324.09 | 32.15% |
| Rio Tinto PLC | 1,374.56 | -563.92 | 143.13 | 1967.41 | -348.88% |
| Rolls-Royce Group PLC | 1,838.74 | 83 | 16.37 | 301.00 | 362.65% |
| Royal Bank of Scotland Group (The) PLC | 11,755.50 | -1,594.00 | 0.00 | 0.00% | |
| Royal Dutch Shell PLC | 3,745.49 | 1,262.63 | 124.465 | 4661.82 | 369.22% |
| Royal Mail Group PLC | 1,000.00 | 241 | 22.1 | 221.00 | 91.70% |
| RSA Insurance Group PLC | 1,018.99 | 235 | 10.5 | 106.99 | 45.53% |
| SABMiller PLC | 1,623.87 | 1,792.65 | 89.821 | 1458.58 | 81.36% |
| Sage Group (The) PLC | 1,079.50 | 194.3 | 13.1 | 141.41 | 72.78% |
| Sainsbury (J) PLC | 1,925.57 | 471 | 12.1 | 232.99 | 49.47% |
| Schroders PLC | 226 | 467.4 | 87 | 196.62 | 42.07% |
| Severn Trent PLC | 235.67 | 330 | 80.66 | 190.09 | 57.60% |
| Shire PLC | 898.57 | 879.78 | 18.01 | 161.83 | 18.39% |
| Sky PLC | 1,719.00 | 666 | 33.5 | 575.87 | 86.47% |
| Smith & Nephew PLC | 895.74 | 266.98 | 20.68 | 185.24 | 69.38% |
| Smiths Group PLC | 395.15 | 246 | 41 | 162.01 | 65.86% |
| SSE PLC | 1,007.63 | 460.6 | 89.4 | 900.82 | 195.58% |
| St James’s Place PLC | 526.97 | 202.2 | 27.96 | 147.34 | 72.87% |
| Standard Chartered PLC | 3,283.07 | -1,428.68 | 9.398 | 308.54 | -21.60% |
| Standard Life PLC | 1,975.37 | 1,423.00 | 18.36 | 362.68 | 25.49% |
| Taylor Wimpey PLC | 3,264.96 | 490.1 | 1.67 | 54.52 | 11.13% |
| Tesco PLC | 8,174.18 | 138 | 0.00 | 0.00% | |
| Travis Perkins PLC | 250 | 167.6 | 44 | 110.00 | 65.63% |
| TUI AG | 586.78 | 254.97 | 41.586 | 244.02 | 95.70% |
| Unilever PLC | 1,283.46 | 3,571.68 | 88.49 | 1135.73 | 31.80% |
| United Utilities Group PLC | 681.9 | 397.5 | 38.45 | 262.19 | 65.96% |
| Vodafone Group PLC | 26,561.45 | -4,024.00 | 11.45 | 3041.29 | -75.58% |
| Whitbread PLC | 182.67 | 391.2 | 90.35 | 165.04 | 42.19% |
| Wolseley PLC | 252.38 | 213 | 90.75 | 229.03 | 107.53% |
| Worldpay Group PLC | 2,000.00 | -29.8 | 0.00 | 0.00% | |
| WPP Group PLC | 1,284.60 | 1,160.20 | 44.69 | 574.09 | 49.48% |
source: Sharescope
Data presented may contain rounding and other inaccuracies and shouldn’t be relied upon for investment decisions.
Miranda Wadham on 10/08/2016