Pandemic sees listed companies chop dividends

Since the start of this year, 493 companies listed on London Stock Exchange have cancelled, cut, or suspended dividend payments, with a 10.8% hike in the numbers doing so over the past four months suggesting this trend is set to continue

According to research from ETF provider GraniteShares, over the period from 1 January to 23 November, half of the FTSE 100 companies (51) reduced or abolished dividends, including Barclays Bank and Lloyds Bank.

The majority of companies to have introduced dividend changes are Aim-listed (149), while 115 FTSE 250 companies made cuts, cancellations or suspensions, along with 178 companies from the small cap, fledgling and main markets.

Royal Dutch Shell cut its dividend for the first time since the second world war earlier in the year, although it has since reinstated payments in October.  AstraZeneca, BAE Systems, BP, Diageo, Rio Tinto, and Vodafone are also still paying dividends despite the financial challenges the pandemic has produced.

The latest figures represent a 10.8% increase in companies reducing dividend payments when compared to the period 1 January to 24 July, and in in contrast to the record high of £110bn paid in dividends by listed UK companies last year.

Will Rhind, founder and CEO at GraniteShares said: ‘Dividends and dividend growth play a very important role helping investors achieve sustainable income and long-term returns, and they are more important than ever now that interest rates are so low.

‘The expected slowdown in GDP in the UK and in many other countries in the fourth quarter means that companies may be under additional pressure to preserve cash, which could put further pressure on dividends. 

‘It is likely that investors will face a long wait until they see dividends return to their pre-Covid levels.

‘With this in mind and against a backdrop of increased market volatility, we are seeing a significant rise in sophisticated investors and professional investors making greater use of shorting and leveraged investment strategies with a view to boosting returns.’

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