I remember hearing about this. In any case, the measure they use in the UK imo is more correct than the dividend payout ratio that we use here:
"Investopedia explains Dividend Payout Ratio
The payout ratio provides an idea of how well earnings support the dividend payments. More mature companies tend to have a higher payout ratio.
In the U.K. there is a similar ratio, which is known as dividend cover. It is calculated as earnings per share divided by dividends per share. "
http://www.investopedia.com/terms/d/dividendpayoutratio.asp
I hear people talk about selling companies that have huge dividends because it is a sign of trouble. That is simple-minded imo, and it may only be true because earnings can be meaningless and can be cooked. But dividends cannot. As stated elsewhere, it is ratios that matter, and imo a combination of the two measures above is the correct way to value whether dividends are too high or too low, not the absolute number.
Finally, I would modify these ratio metrics to include cash the company hoards instead of paying out dividends. GE for example, hoards cash. It has $50B in cash that it does not distribute to its shareholders. You always should have some cash, but $50B???? That's 33% of the entire market cap of that company!
