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Coronavirus: UK dividends almost halve in worst Q3 in a decade

Lucy Harley-McKeown
·2-min read
The 30 St Mary Axe skyscraper, which is known locally as "The Gherkin" is seen in London
'The Gherkin', a local London landmark. Only two sectors in Q3, food retailers and the basic consumer goods, delivered year-on-year increases. Photo: Stefan Wermuth/Reuters

UK dividends fell 49.1% in the third quarter, dropping to £18bn ($23.3bn). This is the lowest total for Q3 for a decade, when companies were still grappling with the fallout from the financial crisis.

Banks accounted for almost two-fifths of the cuts and oil companies another fifth, according to the Link Group Dividend Monitor. Travel and leisure retailers were the worst hit.

Only two sectors, food retailers and the basic consumer goods, delivered year-on-year increases, though only just.

Two-thirds of companies cut or cancelled their payouts in Q3, as economies around the world continued to reel from the fallout of the COVID-19 pandemic.

The decline, however was less severe than in Q2, when dividends fell by 57.2%.

Underlying dividends in Q3 (which exclude special payments) also fell 45.1% to £17.7bn.

Chart: Link Group Dividend Monitor
Chart: Link Group Dividend Monitor

Though despite the gloomy numbers, some positive signs have emerged. Some companies have restarted payouts.

BAE Systems (BAESY) and engineering concern, IMI (IMI.L), became the first companies to catch up on all the dividends missed year-to-date.

Berkeley Group (BKG.L), which had rescinded a big special payout earlier in the year paid a very large interim, five times bigger than 2019, to make up some of the lost ground. Others, like Direct Line (DLG.L), restarted their payouts.

Susan Ring, CEO Corporate Markets of Link Group said: “UK plc is not out of the woods, but the trees are perhaps thinning a bit.

“Looking ahead there is still huge uncertainty. With the pandemic showing no sign of abating and no hoped-for vaccines likely to be distributed for at least several months yet, governments are trying to walk the tightrope of using prolonged restrictions to limit healthcare caseloads without destroying even more of the economy and creating even more unintended consequences for health in other ways.

“There’s no doubt we have a long road ahead before dividends return to pre-pandemic levels, but there is now at least a signpost to the route that will take us there.”

For 2020, Link Group expects UK dividends (excluding specials) to fall to £60.4bn on a best-case basis and £59.9bn on a worst-case basis, a decline of 38.7% and 39.2% respectively. That’s exactly halfway between April’s initial best- and worst-case scenarios (-27% to -51%).

Link Group has also pencilled in a preliminary best-case increase of 15% for 2021 and a worst case of 6%, taking payouts back to levels last seen in 2012 and 2013.

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