The £85 billion divi wipeout

The coronavirus crisis looks set to cost pension funds and savers nearly £85bn in lost dividends.

More than 300 listed companies have cut or cancelled payouts to shareholders as they battle to survive.

Shell last week cut its dividend for the first time since the Second World War and it is thought BT will trim its £1.5bn payout on Thursday.

Overall it is now feared that total dividend payments will fall from £98.5bn last year to just £47.2bn this year, before rising to £65.3bn in 2021.

This would mean that over the two-year period investors will receive £84.5bn less in income than they would have done had payouts stayed at 2019 levels.

Analysts said the hit to dividends – along with the fall in the stock market – was ‘devastating for investors’.

Dividends are a vital source of income for investors and pension funds and crucial to increasing the value of savings linked to the stock market.

The threat to this income stream was underlined last week when Royal Dutch Shell – until now the world’s biggest dividend payer – cut its payout. Britain’s biggest banks, along with blue chip giants including next, Sainsbury’s, BAe Systems, Rolls-Royce and British Gas owner Centrica, have also taken the axe to their dividends.

Veteran City commentator David Buik, a consultant to Aquis exchange, said: ‘The loss of these dividends is devastating for investors.’ Analysis by AJ Bell shows that 309 UK listed firms – including 41 in the FTSe 100 – have cut dividends worth £25.9bn.

Asset servicing group link said its ‘best-case’ scenario sees dividends falling to £61.4bn in 2020 and £79.9bn in 2021 – depriving investors of £55.7bn of income. But in its ‘worst-case’ scenario, the losses reach £84.5bn over this year and next.

Kit Atkinson, head of capital markets for corporate markets in europe at link Group, said the cut to Shell’s dividend, in particular, was ‘more evidence of the appalling damage the pandemic is doing’.

John Moore, senior investment manager at Brewin Dolphin, said: ‘The consequences for pension funds and income investors will be significant.’ Russ Mould, investment director at AJ Bell, said: ‘Recordlow interest rates have forced many savers into the stock market, only for them to run into further trouble.

‘Shell’s move to reduce its payout by two-thirds is one of the biggest blows of all, especially after regulators told the banks to keep their cash in their own pockets so they could better help themselves – and their customers – weather the economic downturn.’