In a reflection of the state of the UK economy and the UK stock market it has been revealed that the average dividend paid by companies in the UK fell by 15% in 2009. This equates to £57 billion which is around £10 billion less than the corresponding figure in 2008 and an obvious disappointment for investors in the UK.

While the figure of 15% is enough to grab the headlines, when you consider the state of the UK economy, the UK finances and the UK stock market during 2008/2009 then perhaps this is not as bad as it could have been. Many companies have either slashed their dividends by a level far greater than 15% or indeed suspended them in the short-term although the vast majority would appear to at least have maintained or just slightly reduced their payments.

Investors will be hoping that an increase in economic activity will soon filter through to the investment markets and hopefully see dividends start to climb again in the short, medium and longer term. Dividends are not only vital for short-term income but they also offer additional funds to reinvest for the future. The return on reinvested dividends can mount up over the years and the reduction in dividend payments is obviously costly.

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