By Lina Saigol
Shareholders in U.K.-listed companies continue to be among those hardest hit by dividend cuts, dealing a blow to investors who rely on shares to provide them with an income.
A total of 493 companies listed on the London Stock Exchange across a range of sectors, canceled, cut, or suspended dividend payments from January through to November, according to data from ETF provider GraniteShares.
That marks a 10.8% increase compared with the period from Jan. 1 to July 2020. Of those 493 companies, 51 were FTSE 100 companies, 115 were FTSE 250 companies, and 149 were companies listed on the junior AIM market.
Insurance giant Aviva (LON:UK:AV) joined the list last week when it said it would cut its dividend by a third, while chemicals group Johnson Matthey (LON:UK:JMAT) declared an interim dividend of 20 pence a share, down from 24.5 pence a year earlier after posting a significantly lower profit for the first half of the fiscal year.
GraniteShares Chief Executive Will Rhind said the expected slowdown in gross domestic product in the U.K. and in many other countries in the fourth quarter means that companies may be under additional pressure to preserve cash, which could put further pressure on dividends.
“It is likely that investors will face a long wait until they see dividends return to their pre-COVID levels,” Rhind added.
Total global dividends fell by 14.3%, or $55 billion, to $329.8 billion in the third quarter of 2020, according to the latest Janus Henderson Global Dividend Index report .
U.K. dividends fell 47% on a headline basis during the period to $18.7 billion — their lowest third-quarter total in a decade. The asset manager said the country is suffering steeper cuts than most other parts of the world. This is mainly due to a sector mix dominated by oil, banking and mining, a history of over distribution among some key companies and because the concentration of dividends in the U.K. had left payouts reliant on a small number of very large companies.
“With banks barred from distributing cash , both the U.K.-listed oil majors slashing their payouts and Glencore (LON:UK:GLEN) canceling its dividend, U.K. payouts have been under significant pressure,” the report noted.
The Bank of England is now reviewing its decision to impose a regulatory ban on bank dividends and could allow lenders to restart payouts in 2021.
“In many ways banks have been unfairly swept up in the markets’ pandemic crossfire as investors followed the playbook of the last war: financials are in much better shape this time and well provisioned to weather the storm,” said Neil Wilson, chief market analyst at Markets.com, in a note to clients on Tuesday.
Meanwhile, Janus Henderson noted that, on the positive side, some companies, like industrial company Ferguson (OTC:FERGY) , have restarted payouts or declared the intention to do so in the fourth quarter. While others considered vulnerable to cuts, such as spirits maker Diageo (NYS:DEO) , were back on the “safe list.”