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