Shareholders lose £1.5 billion in dividend income
Aggreko among the firms cancelling payouts
Shareholders have taken a £1.5 billion hit to their income since the coronavirus hit, with a dozen or so companies this week alone scrapping their dividend payouts.
On Monday 10 companies – Aggreko, Bonhill, Card Factory, Colefax, Go-Ahead, ITV, IWG, Kingfisher, N Brown and Stagecoach – shelved previously announced payments, with Springfield Properties among the latest to do likewise.
Gym Group, InterContinental Hotels, JD Wetherspoon, Marks & Spencer, Marston’s, Microfocus, Shoe Zone, Travis Perkins and William Hill all cut their dividends last week.
Such action would normally prompt alarm and a slump in the shares, but in current conditions it is seen as prudent conservation of cash.
Russ Mould, investment director at AJ Bell, said: “The loss of income (is) …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.
“The pace of cuts is picking up and more look inevitable as companies scramble to preserve cash and management teams accept their share prices are getting no support from any commitments to defend a dividend.”
Investors are keen to hear how boardrooms are responding to the drop in business that they are facing– Russ Mould, AJ Bell
He said that in some cases, investors are greeting the news of a cut with relief. Kingfisher’s shares were up, although investors were less pleased with ITV, given the firm’s commitment to its 8p-a-share dividend for both 2019 and 2020 less than three weeks ago.
“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.
“If a dividend cut is part of the near-term price that must be paid to ensure a firm’s long-term survival or avoid a major rights issue or debt-for-equity swap, then investors may well come to accept it, even if the loss of the precious payments is a big blow.
However, the slump in payments will be a blow to fund managers and fund vehicles dependent on steady income streams from dividends.
Offsetting those concerns will be the satisfaction that managements are maintaining stability.
Share buybacks are also falling by the wayside. Pearson and Shell have joined Playtech, Inchcape and Direct Line in putting their buyback programmes on hold.