UK Edition
Divis fall to lowest level since 2010 in brutal third quarter but 'worst is behind us'
Payouts to shareholders between July and September were £18bn lower than the same period last year
Dividends paid by British companies dropped to the lowest level since 2010 after a brutal third quarter for investors.
Payouts to shareholders between July and September were half as much as the same period in 2019, £18bn lower, according to Link Group’s Dividend Monitor.
It was the lowest amount paid out to investors during a third quarter since 2010, when the UK was still reeling from the effects of the global financial crisis.
Around half of all companies expected to make dividend payments cancelled their payouts, while a further fifth cut them.
Of the £14.5bn worth of dividend cuts in the third quarter, banks accounted for almost two fifths, as they remain barred from paying dividends by the Bank of England.
Travel and retail payouts fell 96pc compared to the same period in 2019, while those from the media, housebuilding and consumer goods sectors were down by two thirds.
It follows a disastrous second quarter, when investors suffered a record 57pc fall in UK dividends.
Susan Ring of Link Group warned there was likely to be further cuts in the final three months of the year and the first quarter of 2020 due to ongoing uncertainty around the pandemic, with much dependent on the hoped-for vaccine, which is unlikely to be distributed for at least several months.
UK shares are now expected to yield 3.6pc over the next 12 months in a best-case scenario or 3.3pc if there is further bloodshed in the market.
Link forecast dividends, excluding one-off special dividends, to fall to £60.4bn on a best-case basis and £59.9bn on a worst-case, a decline of 38.7pc and 39.2pc respectively, although this is higher than it feared last quarter. The group previously predicted a 45pc to 49pc fall.
Susan Ring of Link Group said: “UK plc is not out of the woods, but the trees are perhaps thinning a bit. Our worst-case scenario has steadily improved all year and though investors face a historic decline in their income this year, the worst is now behind us.”
She earmarked April as the first time investors can feasibly hope to see dividends start to increase again, although much will hinge on whether the Bank of England permits the banks to begin distributing again.