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UK Dividend Monitor - Q4 2020

General discussions about equity high-yield income strategies
Itsallaguess
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UK Dividend Monitor - Q4 2020

#379715

Postby Itsallaguess » January 22nd, 2021, 4:49 pm

Some highlights from the latest UK Dividend Monitor (Q4 2020) -

Overview -

• 2020 dividends fell 44.0% to £61.9bn on a headline basis, the lowest annual total since 2011
• Underlying dividends (which exclude special payments) fell 38.1% to £61.1bn
• A better-than-expected Q4 was boosted by suspended payouts being restored, helping 2020 beat our revised best-case forecast by a whisker
• Two thirds of companies cancelled or cut their dividends between Q2 and Q4
• Just one quarter of companies raised dividends in 2020

Where did the COVID-19 cuts fall hardest in 2020? -

• COVID-19 cuts totalled £39.5bn (excluding specials) in 2020
• The financial sector contributed two fifths of the cuts, mainly owing to PRA prohibition on banking dividends
• Oil dividend cuts accounted for another fifth
• Mining dividends contributed one tenth of the cuts, while consumer discretionary sectors saw payouts drop by three quarters
• The classically defensive sectors of healthcare, basic consumer goods, food producers and food retail saw payouts flat or only slightly down between Q2 and Q4
• Special dividends fell by nine tenths over the whole year

Outlook -

• The worst is over but the broader outlook has darkened in the last three months culminating in the renewed lockdown
• Q1 2021 will see further cuts until the anniversary of the lockdown at the end of March, but the decline will be less than in the last three quarters
• For 2021, the biggest upside will come from the banks as they partially restore payouts, with miners also giving a boost
• But it will take time for the wider market to make up for reduced oil dividends
• For 2021, we expect a best-case increase of 8.1% on an underlying basis, yielding a total £66bn; headline dividends (which include specials) would rise 10.0%
• In a worst-case scenario, payouts could fall again in 2021, dropping 0.6% to £60.7bn on an underlying basis, or £61.5bn including special dividends
• We do not expect UK dividends to regain previous highs until 2025 at the very earliest


Here's a download link for the full Dividend Monitor Q4 2020 PDF report -

https://www.linkgroup.eu/media/1489/9668_las_q4_div_monitor_report_2020_web_aw2.pdf

Cheers,

Itsallaguess

Gerry557
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Re: UK Dividend Monitor - Q4 2020

#379874

Postby Gerry557 » January 23rd, 2021, 6:45 am

I know my dividends were down last year but it's difficult to calculate exactly by how much as I added to the portfolio.

Some additions, like lloy, we're looking really good until the rug was pulled. Hopefully that rug or should I say tissue, will be put back soon.

Other top ups have paid out some dividends even if they have been rebased so the overall cut was mitigated by having the extra shares.

Currently the top ups have shown good capital appreciation but doesn't cover all the drop. Additionally the cut in dividend income also means that top ups will be much slower in the future. The snow ball effect in reverse.

There might be an offset though in that when things get back to "normal" (2025?) or before, the income might be yielding double digit returns based on the cheaper buy prices. I'm thinking about some of the REITs which were hit hard and hopefully there is some light at the end of the tunnel...... Or is that another train?

Itsallaguess
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Re: UK Dividend Monitor - Q4 2020

#379876

Postby Itsallaguess » January 23rd, 2021, 6:53 am

I thought this was quite an interesting chart in the latest Q4 2020 Dividend Monitor, as it simply shows the Q2-Q4 2020 dividend status for the UK sectoral payers -

Image

Source - https://www.linkgroup.eu/media/1489/9668_las_q4_div_monitor_report_2020_web_aw2.pdf

It's also interesting for them to see a multi-year recovery to earlier levels of dividend payments, all the way out to 2025 in their opinion, and of course such a long-term recovery is likely to soon see out any 'income-reserves' that may already be getting eaten into for those of us who might hold any UK-facing income Investment Trusts...

With that said, we might flip that gloom on it's head and perhaps start to think it might actually be a good time to buy in to UK income-producing shares, either singularly or via UK-facing IT's, and maybe ride that income-recovery wave into 2025...

Me, I'll continue to hedge my bets and maintain my current balance between UK and more global income producers. Whilst there may indeed be more benefit to being highly skewed one way or the other over coming years, I continue to sleep better having a more globally diversified portfolio of income-producing holdings, predominantly in Investment Trusts over recent years, and I can't see that changing given that it's helped to minimise the COVID-related impact to income being seen by some much more UK-focussed income-investors.

I would just want to caveat all the above with one thing, however, and that's the really quite recent and rapid roll-out of the UK vaccines. I suspect that the 'Outlook' side of things in this Q4 2020 Dividend Monitor might not have had time to take account of this recent and very promising UK development, and so their '2025-recovery' view might well surprise on the upside with a fair wind and continued good progress on that front...

Cheers,

Itsallaguess


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