Simon McGarry, senior equity analyst at Canaccord Genuity Wealth Management, says: "Dividends offered by the UK’s biggest companies are reaching new highs compared to their earnings. The dividend payout ratio for the FTSE 100 has just passed 70%, meaning over the last year dividends have been worth more than 70% of those companies’ earnings.
"The fact that many of these companies are troubled shows that they are under pressure to keep dividends up, even when revenues are trailing off. So just how secure are dividends?
"2015 was challenging, with dividend cuts from food retailers (Tesco, Sainsbury’s and Morrisons) and miners (Anglo American, Glencore), as well as Standard Chartered, Centrica, Rolls Royce and Amec Foster Wheeler.
"And 2016 is going the same way, with the world’s two largest listed miners - Rio Tinto and BHP Billiton – also slashing dividends.
"In Rio’s case, it has had to eat its words – it was so confident in its ability to pay a progressive dividend that it continued to repurchase its own shares in 2015.
"And in March, Barclays announced it would cut its dividend by 50% for two years to preserve capital.
"The era of ultra-low interest rates provided a strong environment for high-yielding shares and, as the tide has risen, so a general “hunt for yield” has driven assets higher.
"Warren Buffet famously said: “Only when the tide goes out do you discover who's been swimming naked”. Now the interest rate tide is ebbing out, we’ll be able to see who’s been swimming naked in the dividend sea.
"Against this underlying backdrop, we feel that investors should be wary of investing in stocks where a dividend cut is likely. Going forward, vigilance is the watchword."