Updated list of quotes from income ITs regarding Covid-19 and dividends. Apologies to DavidM13 who had posted three links prior to my previous update but I missed them. Thanks David, and thanksjonesa1 for the SAINTs update previously incorporated.City of London IT (CTY)
Aberdeen Asian Income Fund IT
Philip Remnant, Chairman, said: "In our Interim Report in February, I said that the Board was confident that it would be able to increase the dividend for a 54th consecutive year. Since then, a number of companies in which we are invested have cancelled their dividends. We continue to recognise the importance of dividend income to our shareholders. Over the last 10 years, we have set aside over £30 million into revenue reserves to underpin future dividends in circumstances such as we face now. Those reserves stood at £58.3 million at 30 June 2019, our last financial year end. If in July we need to draw on those reserves to maintain our unique record of annual dividend growth, then it is our intention to do so."
Scottish American (SAIN)
In light of the ongoing Covid-19 pandemic, the level of the remaining three dividends for 2020 will be considered at each quarter end, at which point an announcement will be made by the Company. There are healthy revenue reserves built up over the past decade that the Board will consider using as appropriate. Any decision as to whether this will be utilised (and by how much) will be taken at the time of each dividend declaration.
Dunedin Income Growth (DIG)
Overall, current expectations are that there will be some drop in SAINTS' revenues in 2020 relative to 2019. SAINTS' own dividend payments are nonetheless expected to be largely supported by anticipated revenues and are also underpinned by SAINTS' significant reserves. At 31 December 2019 SAINTS' revenue reserves stood at over £17m. After deducting the cost of the recently declared fourth interim dividend, the adjusted revenue reserves are equivalent to roughly 9 months of dividend payments (based on the rate of that dividend).
The Board remains confident in the long-term prospects of SAINTS' investments. Taken with the support available from SAINTS' reserves, the Board is therefore also confident in SAINTS' ability to pay a reliable dividend to its shareholders.
Source: https://www.theaic.co.uk/companydata/0P ... 3A03/2784J
Seneca Global Income and Growth (SIGT)
As a result of lower levels of activity in significant parts of the global economy, and the total shutdown of other parts, following the actions of governments in many countries to try to control the Coronavirus pandemic, many companies will report much lower profits in the years ahead. As a consequence there is likely to be real pressure on corporate cash flow. We have already seen several UK companies either passing or cutting dividend payments, even after dividends have been declared. For some UK companies, there may be government, social or regulatory pressure to suspend payments to shareholders. For all companies, careful stewardship of cash resources has become significantly more relevant than it was only a month ago. Distributions to equity investors may rank as being comparatively less important for some time. Against this backdrop, the outlook for dividends for many companies is materially less clear, for the next financial year, and possibly longer.
As an actively managed company with a flexible mandate, we are relatively well placed to identify those companies whose dividends are more secure and whose shares have potential for capital growth. In addition, the Company can use its revenue reserves to supplement the net revenue return in any financial year. It is the Company's objective to grow the dividend in real terms over the medium term and, as we have demonstrated this year, the Board is willing to use the revenue reserve in the achievement of this objective.
Source: https://www.theaic.co.uk/companydata/0P ... 3A05/9723I
OTHER IT ANNOUNCEMENTS...
With the announcement of each quarterly dividend, the Board has given an indication of what the current or next financial year's quarterly dividend rate will be (typically no less than the one announced) but always caveated with the phrase 'barring unforeseen circumstances'. The Covid-19 pandemic certainly qualifies as 'unforeseen circumstances'.
At a time of great hardship and stress for many shareholders, the Board believes it is right to do what it can to help shareholders through this extraordinary period. One of the great strengths of investment trusts is their ability to pay dividends, if necessary or appropriate, out of historically accumulated revenue and other reserves. The Company is well endowed with distributable reserves and is comfortably able to sustain the current dividend rate, even if, as seems certain, that means paying an uncovered dividend.
There are many listed companies being forced or deciding to cut their dividends and it remains to be seen how long these reductions will last and what their level of dividends will be when re-instated. Once this is clearer, the Board will evaluate an appropriate level for the Company's dividend. Until then, it is the Board's intention, barring further unforeseen circumstances, that it will maintain the quarterly dividend rate of 1.68p per share, representing an annualised yield of 5.6% on the closing share price yesterday of 120p.
This is one of the three links that David gave for "The Investment Company Plc". I was torn about this one since my intention was to focus this thread only on ITs with a defined income mandate and I wasn't sure if this one met that criteria. It is however also the one with the least positive "we will support the divi at least for a while" types of noises. That might well be because this IT doesn't self-define as an income IT (I don't know whether it does or not) but on the other hand I didn't want to risk being accused of confirmation bias(*) in selecting only positive quotes so I've created a section here at the end for ones like this. I am more than happy to move it into the main section if the majority opinion is that it should go there. My justification for putting it here for now is because I am unsure as to whether it does define itself as an income IT.The Investment Company Plc (TIDM)
Source: https://www.theaic.co.uk/companydata/0P ... 3A05/2829J
In light of the current Covid-19 situation and the impact it has had on global markets, the Board's priority is to ensure that, as far as possible, the Company's capital is preserved. As previously stated, the Board believes individuals' capital is scarce, and as such should be respected for its irreplaceability.
The dividend that has been declared today is being paid from income received prior to the emergence of the Covid-19 pandemic. However, since July 2018, a key objective of the Board has been to enable the income received by the Company to cover both its operating costs and the cost of dividends paid. Since the beginning of the current financial year, on 1 July 2019, the Company has paid out dividends of 7.5 pence per ordinary share and this, together with the 1 pence announced today, is covered by the Company's net income.
With uncertainty surrounding future dividend payments from companies in The Investment Company's portfolio and the decline in market prices, the Board is consulting regularly with the Investment Manager regarding anticipated income receipts and portfolio valuations with a view to determining the level of future dividends. A further update will be provided in due course.
(*) since I personally believe that certain income ITs such as CTY with hugely long histories of rising dividends to preserve might even start eating capital for a year or two if their borrowing and revenue reserve capabilities fell just a year or two short of getting them through the uncovered-payout crisis before divi cover returned to at least 1.0.