Selfish in a crisis. That is what the affluent are. They panic-buy food, hinted Dave Lewis. If this was a moral judgment, it was unwise. The chief executive of Tesco is himself getting a good dunking in the duck pond of public opinion. The UK supermarket chain is paying a £635m final dividend. Many businesses have suspended or cancelled payouts. Amid the coronavirus pandemic, that seems more patriotic.
Tesco, a model corporate citizen in its broader response to coronavirus, has proved tin-eared. It will get £585m in rates relief thanks to a government scheme intended to help businesses survive. This is in no doubt for grocers, especially with antitrust regulations suspended.
But cancelling dividends should not become a loyalty test. If it does, a wounded economy will sustain worse injuries.
For individual businesses, there is merit in avoiding a public savaging. Consider purveyors of non-life insurance such as RSA, Aviva and Direct Line, which are withholding 2019 final dividends. Inevitably, and unpopularly, they will turn down some claims customers insist were triggered by the pandemic. If the latter worsens, big capital buffers may be needed. Otherwise, the cash can bolster final payouts for 2020.
But if all UK businesses stop paying dividends, the impact would be dreadful. Even if annual payouts are only halved — we are well on the way to that — it would represent a hit of about £50bn. Pension funds would become even more stretched. Asset managers would be even more reluctant to back refinancings of struggling businesses.
Perhaps this is why Legal & General and Standard Life Aberdeen seem intent on paying final dividends for 2019. They are also regulated. None of them even pick a tie or blouse each morning without approval from the Prudential Regulation Authority or the Financial Conduct Authority. The watchdogs wants savings groups to signal they are open for business, putting money to work in the economy.
For some companies, paying dividends is a socially responsible act. The angry mob should remember that the next time they are strapping a hapless chief executive into their ducking stool.
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