Last summer UK investors were nervous about the outcome of a Scottish Referendum and the General Election but were enjoying the benefits flowing from oil and iron ore both trading at over $100 a barrel and a tonne respectively. One year on political uncertainty has been eliminated but both those commodities are trading at half the levels they were and yet the stock market is little changed, down just 2% over the year.

And it is not just commodities that have been repriced. Sterling is now trading at 1.56 to the dollar whereas a year ago it was worth 10 cents less. That 6% appreciation has a major impact on UK businesses that have a sterling cost base yet a revenue stream largely denominated in dollars. This has hurt revenues and margins for many mid-sized British businesses as evidenced by some interim trading updates released over the summer.

These changes might be expected to have a significant impact yet, rather oddly, the shape of the UK stock market has not changed dramatically. HSBC is still the largest company by market capitalisation and also by its share of forecast dividend payments, despite the gyrations of the Chinese stock market. It is followed by the combination of Shell A & B shares and then BP. This is even after the 26% fall in the Oil & Gas Producers sector in the last twelve months.

More change has occurred lower down the list where, for example, Lloyds Banking Group has moved up from the 13th to 7th largest dividend payer as it has returned to making distributions. Interestingly, the opprobrium that still taints bank shares means that its popularity, as measured by market capitalisation, means it still ranks below its importance as a dividend payer. Measured by price it accounts for 2.25% of the index even after its 13% rise over the year, while measured by dividends it is 3.22%. That difference of almost one percentage point is more significant than it might seem as there are only 24 companies that have a total weight of more than 1% when measured by price and 23 when measured by dividends.

Perhaps more surprising is that the expectations of future dividends have actually increased over the twelve month period despite the adverse effects of lower commodity prices and unfavourable exchange rates. In the…

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