UK dividends reached a record £99.8bn in 2018, the highest level since the global financial crisis, according to the Link Asset Services UK dividend monitor.
A combination of rising profits, slightly better-than-expected special dividends and the slump in the pound during the second half of the year all contributed to the record dividend, which was 5.1 per cent higher in headline terms when compared with 2017.
The underlying total, which excludes special dividends, was 8.7 per cent higher at £95.9bn.
British American Tobacco was the main contribution to growth, along with the mining and banking sectors.
In spite of a seasonal low for dividends, the fourth quarter of 2018 also reached a record high, rising 15.6 per cent to £17.3bn.
Justin Cooper, chief executive of Link Market Services, said: "2018 was a terrific year for dividends but a terrible one for share prices. That’s pushed yields to extraordinary heights.
"A very high yield is often a sign of trouble ahead, as investors know that company earnings evaporate very quickly when the economy turns down.
"Dividends are less volatile than profits, as companies tend to smooth the cycle, but they can still be expected to fall if the economy shrinks.
"We still expect 2019 to break new dividend records, but our forecasts are not especially bullish - one or two companies face difficulties and the easy wins from the mining sector are behind us."
According to Link Asset Services, a provider of financial administration solutions, the coming year could see shares yield a collective 4.8 per cent, with the top 100 expected to yield 5 per cent and mid-caps approximately 3.3 per cent.
Yields that high were last recoded during the 1991 recession, according to The Barclays 2018 Equity Gilt Study.
In comparison, this time last year the collective UK equity yield was 3.6 per cent.
For 2019, Link forecasted growth of 4.2 per cent to a total of £104.1bn. Underlying growth (which excludes specials) is estimated to be 5.3 per cent pushing UK payouts to a total of £101.1bn.
Cooper added this implied "an overly pessimistic view".
He said: "The current disconnect between the level of dividends being paid and share prices doesn’t obviously mean share prices must rebound any time soon.
"The yield may stay elevated for as long as uncertainty persists. But if the world does sink into a recession in the next couple of years, or Brexit goes badly, the drop in dividends is likely to be in the 10-15 per cent range, not the 25 per cent or so currently implied by the market."
Martin Bamford, chartered financial planner at Informed Choice, said: "One positive to come from falling equity markets is higher dividend yields.
"New income seeking investors will be especially pleased to be able to access yields at these levels, that also come with the prospect of long-term capital growth.
"All investors should consider dividend income, whether extracted or reinvested, to form a core part of their overall returns. For investors focused on capital growth, the long-term cumulative impact of reinvesting dividends is significant."