Projected dividends

[Arborbridge]

I see articles now mentioning the virtue of 2x cover for dividends - after the horse has bolted as is normal with journos. 2x cover has always been the advice for decades as I'm well aware, but people stopped talking about simply because it became rarer. Even ten years ago, if memory serves, it wasn't easy to search for FTSE 100 companies paying a decent yield at that cover, and I had to lower my criterion to 1.3-1.4 before most of the big companies showed up.

As for 2% or 3% being a "decent" yield. Well, I doubt many of us pensioners could feed ourselves on that. If a previous "decent" yield was 4% we would need to double our capital - somewhat difficult if you've retired or are knocking on 80. And of course this decent yield of 2% is on a much reduced capital, having been just knocked for six. I'd say 2% is not at all a decent yield and hardly compensates shareholders for the risks they are taking.

But don't mind me - I'm just in a grumpy mood today

Arb.

[scrumpyjack]

Well I'm sure most of us would like to get a secure 6% index linked return on our capital to see us through retirement. I'm just saying I don't think that is a realistic expectation now, if it ever was! Everything is relative, and relative to negative real yields on cash, 2% or 3% looks good, even if it won't keep one in the style one feels one is entitled to. Most people will have pension income other than their dividends (if any), (state pension, occupational pension etc), so do not anticipate having to eat purely off their returns on capital.

[kempiejon]

As for 2% or 3% being a "decent" yield. Well, I doubt many of us pensioners could feed ourselves on that. If a previous "decent" yield was 4% we would need to double our capital - somewhat difficult if you've retired or are knocking on 80. And of course this decent yield of 2% is on a much reduced capital, having been just knocked for six. I'd say 2% is not at all a decent yield and hardly compensates shareholders for the risks they are taking.

If the dust settles and business restarts and casualties are counted the ftse100 will still be there, I'd not like to hazard what the yield will be and its constituents that have a 5 year history of paying an increasing dividend might well be around 2% or 3%. This time next year the constituents of a HYP and available average yield could look different to what we've seen these past few years.

[dspp]

Moderator Message:
If you want to discuss non-HYP matters such as your tenants or your bank balance or your moods, or whatever, that is fine. But do not do it on the HYP board as that understandably miffs some of your fellows, and causes needless work for Mods in dealing with the alerts that follow. regards, dspp

[Wizard]

Recent Dividend History |      |           |           |         |           |           |    
Company                 | EPIC | Year End  | Div'd CCY | GBP     | Change    | Div'd CCY | GBP
Vodafone Group          | VOD  | 31-Mar-19 |   -40.28% | -40.35% | Increase  |       11  | 13 
IG Group Holdings       | IGG  | 31-May-19 |     0.00% |   0.00% | Unchanged |        6  |  4 
Standard Life Aberdeen  | SLA  | 31-Dec-19 |     0.00% |   0.00% | Decrease  |        2  |  2 
Aviva                   | AV   | 31-Dec-19 |     3.00% |   3.00% |           |           |    
Imperial Brands         | IMB  | 30-Sep-19 |    10.00% |  10.00% |           |           |    
WPP                     | WPP  | 31-Dec-19 |     0.00% |   0.00% |           |           |    
HSBC Holdings           | HSBA | 31-Dec-19 |     0.00% |   6.87% |           |           |    
ITV                     | ITV  | 31-Dec-19 |   -67.50% | -67.50% |           |           |    
Royal Dutch Shell       | RDSB | 31-Dec-19 |     0.00% |   1.88% |           |           |    
BP                      | BP   | 31-Dec-19 |     1.23% |   4.04% |           |           |    
Land Securities Group   | LAND | 31-Mar-19 |     3.05% |   3.05% |           |           |    
British Land Company    | BLND | 31-Mar-19 |     3.06% |   3.06% |           |           |    
BHP Group               | BHP  | 30-Jun-19 |    12.71% |  18.95% |           |           |    
Pennon Group            | PNN  | 31-Mar-19 |     6.40% |   6.40% |           |           |    
GlaxoSmithKline         | GSK  | 31-Dec-19 |     0.00% |   0.00% |           |           |    
BAE Systems             | BA   | 31-Dec-19 |     4.50% |   4.50% |           |           |    
DS Smith                | SMDS | 30-Apr-19 |    10.20% |  12.81% |           |           |    
Carnival Corporation    | CCL  | 30-Nov-19 |     2.56% |   6.10% |           |           |    
Ibstock                 | IBST | 31-Dec-19 |    54.74% |  54.74% |           |           |

The above table is backward looking but, as far as I am aware, none of the companies listed, apart of course from ITV PLC (ITV), has yet indicated a future suspension of dividends.

Of course, the affects of the Corona Virus, or rather the Governments reaction to it, is still unfolding and there may well be further dividend suspensions coming up. The dividend for Carnival Corporation (CCL) is most definitely under threat thanks to suspension of operations by Princess Cruises but, apart from CCL and of course ITV, which others are more likely than not to suspend dividends for the whole of the next 12 months? I must confess that I cannot see any.

Therefore, for now at least, I believe that your forecast of a 50% drop in income is unduly pessimistic, for this portfolio at least...

For what it is worth, of those I would suggest the following as likely cutters or suspenders:
Aviva - claims impact (cut)
WPP - reduced marketing /advertising spend by clients (suspend)
BP - they do not have Shell's epic record to maintain and revenues must have gone off a cliff (cut)
Land Securities - REIT rules have an impact but revenue must be reduced (cut)
British Land - REIT rules have an impact but revenue must be reduced (cut)
BHP - must be lower demand from industrial customers (cut)
BAE Systems - impact on civil business (though not as bad as for Meggitt) (cut)
Carnival - not even sure the company will survive in its current form (suspend)
Ibstock - reduced demand for products due to house building slowing dramatically (cut)

OK, so three days on I appear to have been rather too optimistic on Ibstock. British Land may make some of its current suspension up depending on how it deals with REIT rules, but Land Securities must look more likely than ever to cut now IMHO.

We can now confirm the loss of the WPP, Carnival, Ibstock and Land Securities dividends. And of course HSBC, which I did not include in my list of suggested cutters in the new PYAD HYP.

Looking forward to the updates as at the current time I anticipate an interesting discussion will follow their publication.

[bluedonkey]

I'm just a few years away from retiring and at that time starting to live off dividends. My portfolio income in past downturns was not so critical as new capital was being added and retirement was still many years away.

This episode will be a dry run on how my income might be affected when I am actually living off it. In particular the cash reserve that I would need to make up for the drop in dividend income. As Dod points out, this drop in dividends is slightly different from past ones in that expenditure is automatically falling to partly compensate: no cafe/pub/restaurant visits, no holidays.

[Wizard]

I just spotted that in our list of dividend cutters we missed Glencore. Does this mean Rio and BHP are also likely to cut?

[Darka]

I just spotted that in our list of dividend cutters we missed Glencore. Does this mean Rio and BHP are also likely to cut?

I hope not...

[daveh]

I just spotted that in our list of dividend cutters we missed Glencore. Does this mean Rio and BHP are also likely to cut?

BHP paid their dividend on 24/3/20 (65c) and the next payment isn't due until September. Maybe we will have a bit more clarity by then?

[Bouleversee]

I don't have time to go back over all the preceding posts. Can anyone tell me whether it is certain that RB will be paying its next dividend. My Iweb account says that they went x-d on l6/4 and that a dividend of 101.60p will be paid on May 28, but I am by no means certain that this is up to date and confirmed. I couldn't see any reference to it on their website and failed to get through to anyone on the phone.

It does say in their Feb. 27 report that the Board will be recommending that dividend, but I don't know whether there has been any change in the meantime.

[Alaric]

I just spotted that in our list of dividend cutters we missed Glencore.

I didn't think Glencore paid dividends in the conventional sense. What they did was make regular capital distributions. That they could do this was something to do with not being UK registered. The distributions were a small percentage of the share value, so behaved like dividends for practical purposes other than tax.

[SalvorHardin]

I don't have time to go back over all the preceding posts. Can anyone tell me whether it is certain that RB will be paying its next dividend. My Iweb account says that they went x-d on l6/4 and that a dividend of 101.60p will be paid on May 28, but I am by no means certain that this is up to date and confirmed. I couldn't see any reference to it on their website and failed to get through to anyone on the phone.

It does say in their Feb. 27 report that the Board will be recommending that dividend, but I don't know whether there has been any change in the meantime.

A quick look at the RNSs on Investegate. The annual results RNS was published on 27th February 2020, where Reckitt Benckiser said it would be paying a 101.6p dividend.

https://www.investegate.co.uk/reckitt-benckiser-gp--rb--/rns/full-year-results-2019/202002270700092715E/

None of the RNSs posted after that date mention anything about changing the dividend or cancelling it (they would do so in the title as it's that important). So it's going to be paid, barring further developments. The link below shows the most recent announcements.

https://www.investegate.co.uk/CompData.aspx?code=RB.&tab=announcements

[Bouleversee]

Many thanks, SH. I shall assume it's coming in May, then.