Given the weaker sterling but resilient global growth outlook, Citi agrues that U.K. earnings per share growth estimates will be positive by 2017, the first time it has moved into the black in five years.
Since mid-2012, U.K. earnings on a trailing basis have declined about 50% but trailing dividends per share have increased 20%, causing the payout ratio to rise to 90%, the highest in 50 years.
This “is unsustainable… either UK companies will need to cut dividends or earnings will need to improve (soon),” Citi said.
Related: Look to Currency-Hedged U.K. ETFs as BOE Signals Looser Policies
Looking ahead, many expect the Bank of England to enact more accommodative measures to help bolster the economy. In the post-Brexit environment, Martin Weale, one of the bank of England’s long-time hawks, is even beginning to turn dovish on their policy outlook.
Click here to read the full story on ETF Trends.
Deutsche X-Trackers MSCI United Kingdom Hedged Equity ETF