It is a measure of how dramatically the financial climate has worsened in the past few weeks that investors seem to have stopped punishing companies for slashing their dividends.

Mitchells & Butlers' decision to scrap the final dividend was met with a rise in the share price on Wednesday. Yet when M&B's rival Punch Taverns did the same thing in September its shares were hammered as investors decided this meant its survival was in question.

Last week, Enterprise Inns decided to maintain the final dividend and the shares took a dive. Ted Tuppen, the chief executive, clearly thought that he was showing his confidence in the company's cash position. Instead he found himself criticised for burying his head in the sand and putting off the inevitable.

The relatively forgiving climate for dividend cuts may be encouraging more companies to bite the bullet. DSG International, the former Dixons electricals retailer, yesterday added its name to the list as it scrapped its dividend after falling into the red. It was rewarded with an initial rise in the share price, although it ended the day well down.

The importance of pension funds in the UK stock market and their need for income from what were heavily equity-weighted portfolios has historically put British companies under huge pressure to maintain their dividends except in the most dire circumstances.

But these days, many shareholders appear to be so concerned about the ability of companies to refinance their debts when they come due that they would much prefer for the cash to stay in the business than be paid out in dividends.

While dividends for the market as a whole will continue to be much more resilient than earnings, this may mean that payouts will fall more steeply than many analysts have been expecting. It looks certain that they will fall by more than the 5-6 per cent seen during the recession of the 1990s. And investors searching for dividend income need to be very careful about assuming that an apparently fat yield is safe.

Bank shareholders have had a particularly disappointing time. Most recently Standard Chartered investors have seen the dividend trimmed as part of its rights issue. Some analysts wonder whether even HSBC's payout is certain to be maintained.

Some companies are continuing to increase the payout in the face of tough trading, however. Brewin Dolphin, the wealth management group, edged up its dividend yesterday, in spite of a fall in profits, for a yield of more than 8per cent. But then, the company has a £50 million cash pile and, perhaps as important, 30 per cent of the shares are held by the staff.

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