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is the income tide turning?


So far this year 48 FTSE 100 companies have cut or suspended shareholder payouts compared to 47 that have kept or increased their returns

Corporate dividend trends are difficult to identify, with the impact of the coronavirus having led to almost half of FTSE 100 companies cutting or removing their payout but some companies still increasing their shareholder returns. 

Thursday was a case in point of how companies are taking different approaches to dividends amid the pandemic.

READ: In dividends we trust – analysts highlight investment company options

FTSE 100 chemicals group Johnson Matthey (), heavily exposed to the auto industry, said it will still pay a final dividend, although cutting it in half as it announced plans to cut around 2,500 jobs over the next three years.

Meanwhile, B&M European Value Retail () upped its final dividend as the discounter, which just missed out on promotion to the blue chip index, reported unusually strong trading had continued during the pandemic.

Outdoing them both was online CFD broker  (), which unveiled a 640% hike to its final dividend, resulting in a total dividend of 15.03p, up from 2p paid the year before.

Earlier in the week it was AVEVA PLC (), PLC (), PLC () and () that were delivering encouraging dividend news.

It’s tempting to see that the trend has swung back in favour of income investors.

Johnson Matthey’s cut means that 48 blue chips have now announced some kind of reduction to or suspension of payments to shareholders, compared to 47 that have kept or increased them since the start of the year.

But dividend payments from the Footsie’s constituents for the past financial year has already been slashed by £9.5 billion or 11%, according to data from AJ Bell.

For the whole of the London market, almost £32bn of dividends have been cut since the start of March as the impact of the coronavirus began to show itself in the UK.

FTSE 100 dividends for this year are forecast to fall by a further £11.8bn or 16%, according to an aggregation of analysts forecasts by AJ Bell, with the total forecast dividends of £63bn for 2020 on course to be the lowest in six years.

Looking forward, 2021 is expected to see London’s blue chips pay dividends of £77.4bn, up £14.4bn to 22.9% from this year but still down from the £84.3bn paid for the 2018 financial year.

“Optimists will point to the resilience of dividend payments, as even a total drop of 25% from 2018 to 2020 – providing forecasts for this year prove accurate – could be an awful lot worse under the economic circumstances,” says Russ Mould, AJ Bell’s investment director. 

The 47 blue chips keeping up or increased payments points to the resilience of some companies’ financial strength and business models, Mould says, although he notes that some of those declared and paid out for the second half of 2019 before the viral outbreak took hold in the UK, US and Europe – “so their planned payments for the first and…



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