Biggest hit to dividends in generations sees investors lose out as firms keep cash
INVESTORS suffered a record 57pc fall in UK dividends in the last three months as profit warnings spiked and companies dashed to conserve cash.
A total of 206 companies, representing three-quarters of firms paying dividends in the second quarter, cut or cancelled their payouts, according to Link Group’s Dividend Monitor.
Companies reduced shareholder payouts to £16.1bn in the face of a collapse in economic activity during the pandemic. Regulators also forced banks to halt payouts and put pressure on insurers to conserve cash to ensure their balance sheets would remain strong. The financial sector accounted for half of the reduction in dividends.
Susan Ring, chief executive of corporate markets at Link Group, said: “The second quarter was truly a record breaker. Not by a whisker, nor by a nose, but by a mile. The whole of 2020 will, without doubt, see the biggest hit to dividends in generations.”
Link predicts that UK dividends for the full year will fall by between 45pc and 49pc before rebounding in 2021.
Coronavirus’s impact is now spreading down through supply chains and hitting companies not directly exposed to the pandemic, according to figures from EY. The consultancy found that 165 FTSE 350 firms warned on profits in the second quarter of the year, almost triple the number in the same period last time round.