The UK’s 100 biggest listed companies have cut payouts to shareholders by nearly £24bn since the start of the pandemic.
On Thursday, BT became the latest FTSE 100 group to suspend its dividend, saving itself about £3.3bn over the next two years, as companies move to conserve cash in the face of the economic crisis. It also warned that future payments would be lower.
BT’s decision means that since the start of the outbreak, FTSE 100 firms have so far withheld £23.8bn of payments for the period 2019-21, according to AJ Bell, the stock broker. At the start of the year, the FTSE 100 had been expected to pay out around £89bn in dividends in 2019 and £91.5bn in 2020, it said.
Investors are preparing for several years of lower payouts by some of the most reliable dividend-paying stocks in the FTSE 100. It is the first time BT has suspended its full year payout since it was privatised in the 1980s.
It follows other traditional dividend-paying stalwarts in cutting or postponing payouts, including Shell for the first time since the second world war.
Shell was the top dividend payer in the FTSE 100 for seven of the past eight years, according to investment bank Gleacher Shacklock. BT was also in the top 20 biggest payers.
Banks and insurers have cut dividends after pressure from the government.
Among the FTSE 350, more than a third of companies have suspended or cancelled dividends since the start of March, according to Gleacher Shacklock, with only 23 declaring a dividend in that time.
James de Uphaugh, a fund manager at UK asset manager Majedie, said the UK faced fundamental changes to dividends.
“Dividends can’t return to the levels they were at. Some companies were effectively over distributing. The crisis gives the opportunity for many companies to reappraise that.”
He added that it was problematic for companies accessing government support to pay dividends.
“In terms of 2021, there will be some companies who return to the dividend list, like the insurers. Depending on the speed of recovery, we will see others return, but they will probably return at a lower level.”
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The gloom about dividends has meant that equity income funds now dominate the list of worst-performing funds in the UK, according to Morningstar, the data provider.
Two Invesco funds run by Mark Barnett, a former protégé of fund manager Neil Woodford, lost about 30 per cent in the four months until the end of April. Equity income funds run by JO Hambro, Schroders and Jupiter have lost at least 25 per cent.
Britta Weidenbach, Emea co-head of equities at DWS, said the cuts could be long term in some cases. But she added: “For a lot of companies . . . they wanted to make sure that, in case they come to the point where they might want to use government-support programmes, they are not hindered by the fact that they paid dividend.”
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