Dividends have long been particularly significant features of the UK stock market, which remains the highest-yielding developed market globally.

In fact, academic studies have shown that over the long term virtually all of the real return, which takes account of the impact of inflation, from the UK equity market has come from dividends being reinvested to compound growth, so investing in companies that can sustain and grow their dividends is a very wise long-term investment strategy.

And Brits’ love of dividends is evident in the enduring popularity of UK Equity Income funds, a sector representing £63.8 billion of assets, which often sit at the heart of their long-term savings.

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But there are serious headwinds for UK dividends at the moment above and beyond the current political uncertainties, with a number of red flag signals that investors reliant on dividend income need to be aware of.

If anything, the fall in the value of sterling since the Brexit referendum last year actually helped flatter the picture for UK dividends. While these rose by 6.6 per cent in 2016, 92 per cent of this was down to the benefit of revenues earned in foreign currencies being translated back into the weaker pound rather than underlying growth.

A concern is that the UK stock market has increasingly taken on the characteristics of a cash point machine, with 89 per cent of profits last year being paid out as dividends rather than reinvested by businesses.

This is certainly the highest level in my lifetime and way outside the 40-year pay-out range of 20 to 60 per cent.

With such a high level of distributions, the headroom for further dividend growth is seriously limited without a major acceleration in profits. This has led to rising concerns about the sustainability of dividends at some companies, with dividend cover - the ratio of profits divided by dividends - plummeting. Worryingly, some companies are effectively sustaining dividends by increasing their debt.

The overall UK dividend pool is also incredibly concentrated, with just five companies - Royal Dutch Shell, HSBC, BP, GlaxoSmithKline and Vodafone - accounting for 38 per cent of all UK dividends last year.

The exposure to the oil and gas sector, which last year accounted for 19.6 per cent of UK dividends is a real vulnerability given the volatility in energy prices. While oil prices staged a recovery during 2016, ending a two-year rout, more recently prices have weakened again despite coordinated efforts by OPEC, the oil cartel, to support prices through reduced output.

The emergence of the US shale oil industry is proving a game changer and the days of $100 a barrel oil prices look increasingly like ancient history.

So what should investors do? While no other developed market can beat the UK for current headline yields, better dividend growth prospects arguably lay elsewhere and it makes sense to diversify income-generating portfolios beyond the UK.

One such region is Continental Europe, where economic growth is clearly accelerating. While last year’s dividend pay-out rates in Europe of around 67 per cent of earnings were also high, there is clearly more scope for increases than in the UK.

Importantly, the make-up of companies listed on European markets is biased towards companies in traditional industries that are sensitive to improvements in the economic cycle. Many of these businesses have had to endure several tough years of sluggish growth on lean diets and that has driven restructuring and cost efficiency, which should leave them well positioned for profits to rebound as growth picks up.

Analysts at Goldman Sachs estimate that in aggregate for every one per cent of sales growth, European companies on average will grow their net profits by 2.8 per cent making them very geared to an improving economic outlook.

Some of the strongest dividend growth opportunities may also be found in a most unlikely corner: Japan, a very low-yielding market but one that is undergoing a major shift due to corporate governance reforms designed to encourage companies to become more shareholders friendly.

Jason Hollands is managing director of Tilney Group.