UK company dividends rose 14.5% to an all-time high of £37.8 billion in the second quarter, beating the previous record of two years ago by £4.4 billion, according to the latest UK Dividend Monitor from Link Group.

The report said huge special dividends from larger firms including RBS, Rio Tinto and Micro Focus International contributed most to the headline increase.

Announcing its annual results in February, RBS said it would pay a special dividend, boosting its total dividend payments to shareholders for 2018 to £1.6 billion.

However, Link Group said the “quality” of dividend growth was “relatively poor” because, for the second quarter in a row, exceptionally large special dividends from certain firms and a weak pound provided a temporary boost.

Underlying dividends — which exclude special dividends — rose 5% to £32.4 billion.

“Though the total paid was a record, exchange-rate gains made up almost half the increase, and growth was otherwise a touch slower than Link expected,” said Link Group.

“Large-cap companies, which benefit disproportionately from the weaker pound, grew their payouts much faster than their mid- and small-cap counterparts.

“Huge special dividends from Rio Tinto, Micro Focus International and RBS contributed most to the headline increase.

“Barclays also paid its largest post-crisis dividend, and along with RBS and Standard Chartered, helped make the banking sector one of the top performers.

“The top 100 saw payouts jump 18.5% in headline terms, but the underlying increase was a more modest 5.7%.

“More than half of this was down to exchange-rate effects.

“On an underlying basis, mid-cap dividend performance has lagged behind the top 100 for six consecutive quarters.

“In Q2, their payouts rose just 0.8%. Headline mid-cap dividends dropped 5.7% thanks to lower specials.”

Link Group said rising share prices have meant lower yields on equities since the beginning of the year — but they are still extremely high by historic standards.

This reflects the underperformance of UK shares and growing concerns over the UK and global economy.

Link Group said that over the next 12 months equities will yield 4.2% (excluding special dividends), with the top 100 producing 4.4% and the mid 250 producing 2.9%.

In January, shares in UK plc yielded 4.8%.

“Link’s headline forecast for 2019 received a hefty £2.8bn upgrade based on the fall in the pound and stronger special dividends,” said Link Group.

“Specials will hit their second highest ever this year.

“Link now expects a headline £107.4bn in 2019, an increase of 7.6%.

“Excluding volatile special dividends, underlying growth is set to be 2.9%, almost two thirds of which is down to likely exchange-rate gains.

“Link has downgraded its forecast for underlying dividends by £500m to £98.7bn.”

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.

“Q2 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.”