British companies paid out a record amount to shareholders in the second quarter of this year but underlying growth was weak, according to a new report.
UK dividends rose 14.5% to a record £37.8 billion, the latest UK Dividend Monitor from Link Group has found.
The fresh high is £4.4 billion more than the previous record, which was set two years ago.
However underlying growth of 5% was weaker than expected and largely driven by exchange rate effects.
Meanwhile the headline figures were flattered by some exceptionally large one-off dividends.
Michael Kempe, chief operating Officer of Link Market Services said: “Investors are being dazzled by eye-catching specials and exchange-rate trimmings, but the UK’s dividend clothes are starting to look a bit threadbare underneath.
“As the world economy slows, and a looming Brexit exacerbates the underperformance of the UK economy, corporate profits are under pressure and that is limiting the scope for dividend growth.”
Top-level figures are expected to keep growing, the report said, with special payouts set to hit their second highest rate ever.
But with these volatile dividends stripped out, underlying growth for the full year is set to be just 2.9%, almost two thirds of which is down to currency movements.
Link said it had upgraded its headline figure forecast by £2.8 billion, but reduced its estimate for underlying dividends by £500 million.
Mr Kempe said: “The second quarter marks both the second upgrade this year to our headline forecast and the second downgrade to our underlying one.
“The true picture for dividends this year is therefore notably weaker than a first glance might suggest.”
Top-performing sectors included banking, which was given an extra lift by RBS’s special dividend when the bank paid an additional 7.5p per share.
But mining dividends were lower once a large special payout from Rio Tinto was taken out of consideration, due to heft share buybacks reducing the number of shares on which dividends are paid.
Retail and property dividends were also weaker, as the challenges facing the high street hit company balance sheets.