The day’s wave of dividend cuts and suspensions brought the total so far this year to £1.5bn, as the coronavirus pandemic prompts companies to hoard cash and bolster their balance sheets.
“The pace of cuts is picking up, too, and more look inevitable as companies scramble to preserve cash and management teams accept their share prices are getting little or no support from any commitments to defend a dividend,” said Russ Mould, investment director of AJ Bell.
Investors, whose portfolios have already been dented by record market losses, are preparing for further cuts, not all of which are unwelcome, according to Mould.
“In some cases, investors are almost greeting the news of a cut with relief. Kingfisher’s shares are up today, as are those of Go-Ahead, although shareholders in ITV appear less pleased, given the firm’s commitment to its 8p-a-share dividend for both 2019 and 2020 less than three weeks ago,” he said.
“That shows how fast-moving the situation remains and how difficult it is for companies to plan. Yet investors are keen to hear how boardrooms are responding to the drop in business that they are facing. They will be looking for detail on plans to cut costs, husband cash and weather the coming downturn,” said Mould.
By the end of 2019, dividend payments from FTSE 100 (^FTSE) companies had almost doubled since the end of the financial crisis, from £46bn to around £90bn.
Before the onset of the coronavirus pandemic, analysts had predicted a further increase in dividend payments this year.
“The loss of income from today alone totals some £500m and takes the running aggregate this year to some £1.5bn, a big blow for portfolio builders and savers who are looking for income at a time when interest rates on cash are reaching new historic lows,” said Mould.
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