Executive Summary -
A year of COVID-19 – the full dividend picture -
- Payouts fell 41.6% on an underlying basis as cuts and cancellations totalled £44.8bn
- The rate of decline slowed as each quarter passed, from -48.2% in Q2 2020 to -26.7% in Q1 2021 on an underlying basis (i.e. excluding specials)
- Two thirds of companies made a cut during the year, but the impact varied widely from sector to sector
- By value, banks, miners and oil companies made up three fifths of the cuts, while food retailers were the real winners, with payouts up 22% More than a quarter of companies increased dividends, even during such a severe recession
Q1 2021 in focus -
- Payouts fell 26.7% to £12.7bn year-on-year on an underlying basis
- But there were signs of improvement – the decline was the slowest in a year, and half of companies increased, restarted or held dividends steady
- Cuts totalled £5.8bn – about half came from the oil sector
- Headline dividends jumped 7.9% thanks to the second-highest one-off specials on record – Tesco was mainly responsible, but so were resurgent mining profits
- Top 100 companies continued to show greater resilience than mid-cap and smaller companies
Yield -
- 12-month prospective yield held stable at 3.1% on a best-case basis (excluding special dividends), but worst case improves
- Top 100 set to yield more than twice the mid-caps
Outlook -
- Banking dividends will return in Q2, but at a lower level than before the pandemic
- Mining payouts are coming through more strongly than expected, as are media and insurance, but oil payouts are slightly weaker than forecast
- Best-case forecast reduced to £66.4bn, an increase of 5.6% year-on-year
- Headline payouts set to jump by a sixth on a best-case basis to £74.9bn
- Worst case sees an upgrade thanks to greater visibility – dividends should rise no less than 0.9% this year
- Headline figures will be boosted by very large one-off specials
- 2025 is still a realistic target for regaining 2020 highs
The always-interesting and comprehensive Q1 2021 Dividend Monitor report from Link Group can be downloaded in PDF form using the following link -
https://www.linkgroup.eu/media/1593/link-group-uk-dividend-monitor-q1-2021.pdf
Cheers,
Itsallaguess