personal finance

Dividends cut by 445 LSE-listed companies


A total of 445 companies listed on the London Stock Exchange cut, suspended or cancelled dividend payments in the first half of this year, according to new figures.

The largest number of dividend changes were made by Aim stocks, with 139 of these companies adjusting dividends. But 50 companies listed on the FTSE 100 also altered their dividends in 2020, as did 108 companies on the FTSE 250 index.

The research by GraniteShares, a provider of exchange traded funds, looked at dividend payments between January 1 and July 24.

The pandemic has hit businesses hard and many companies are holding on to cash reserves by cutting dividends. Companies that have cut or cancelled dividends in recent months include Royal Dutch Shell, Lloyds Bank, Barclays and Rolls-Royce. 

The changes to payouts will hit income investors, many of whom rely on dividends to boost their pension and investment earnings.

Will Rhind, chief executive of GraniteShares, said it would be some time before dividends returned to pre-pandemic levels given the economic toll and expected job losses. “We expect to see a rise in sophisticated investors and professional investors making greater use of shorting and leveraged investment strategies to boost returns.”

Some analysts said investors should not lose faith in companies on the strength of a change to the dividend.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “Income investors may be feeling a bit shaky after having the dividend carpet whipped out from under their feet so much this year, but they shouldn’t let it throw them off track. In this environment, just because a company has cut the dividend, it doesn’t necessarily mean income investors need to sell up and ship out.”

In some cases, the cut had been precautionary and businesses have proved to be more resilient than expected, she said. In financial services, where there was a swath of dividend cuts, companies were either ordered or advised to do so by the regulator. Some of those companies that cut or suspended their interim dividend may well make a full-year payout.

Ms Coles gave the example of BP, where profits were hit by the collapse in oil prices, sparking a strategic rethink and forcing it to halve its dividend.

“However, the stock is currently offering a 7.5 per cent dividend yield,” she said. “There will be additional risks posed by a lower oil price and a strategic shift, but if that works within your wider portfolio, it’s attached to an attractive dividend.” Ms Coles added that some sectors are still delivering reliable dividends including utilities, pharmaceuticals, tobacco and life insurers.

Russ Mould, investment director at AJ Bell, said the cash value of dividends retained and paid exceeded the total of cuts, deferrals, cancellations or suspensions for the second month in a row in July. “[They] are currently on course to do so again in August,” he added.

Twenty-five companies have now rejoined the dividend list and recommenced payments, he added. “This does not guarantee a powerful recovery but it is a promising sign nevertheless.”



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