Interactive Investor

Banks, dividend tracker and most-bought SIPP shares this tax year

1st April 2020 10:51

Jemma Jackson from interactive investor


Share on

interactive investor’s experts share their views on bank dividend cuts, the impact on income funds and 10 most-popular stocks.

UK Banks have historically been a popular choice for income seekers, and in the current tax year up to 31 March 2020, three of the top 10 most-bought direct equities in the interactive investor SIPP were banks (see table below).

interactive investor today publishes the most-bought direct equities in its SIPP over the current tax year to date, together with an updated UK dividend tracker covering the last long 15 days, alongside comment from Lee Wild, Head of Equity Strategy; Dzmitry Lipski, Head of Fund Research, and Richard Hunter, Head of Markets. What’s next for income seekers?

Lee Wild, Head of Equity Strategy, interactive investor, says: “A few short weeks of dividend suspensions and cancellations look set to become a long hard slog for income seekers as companies rush to save cash amid the unprecedented coronavirus lockdown.

“With no idea when the virus will end, or little clue what the financial impact will be, businesses are having to prepare for the worst as income investors’ patience gets tested like never before. Investors will have to get used to receiving their dividend income from a shrinking pool of stocks for the time being and income diversification – both at a sector and country level, will likely become even more key.”

Dzmitry Lipski, Head of Fund Research, interactive investor, says:

“For fund investors, financials are very popular with UK equity income funds and especially in strategies that have a value tilt. The bank dividend cuts compound issues the UK equity income sector has grappled with for years in terms of concentration of income – more than 50% has been concentrated to a few stocks. This is how many fund managers and DIY investors end up with a large concentration of banking stocks. Global diversification of income is now even more important.”

Most bought direct equities in interactive investor SIPP in current tax year to 31 March 2020 (in rank order)

Richard Hunter, Head of Markets at interactive investor, says: “The announcement that banks will be suspending existing and future dividends and share buybacks ticks the boxes of moral duty and an additional capacity to lend, but from an investment perspective it removes a core plank of the case for buying bank shares.

"The current yield of the UK banks, soon to evaporate, is testament to the fact that some are core portfolio holdings. Lloyds Banking Group (LSE:LLOY) has a dividend yield at present of 10.5%, Barclays (LSE:BARC) 9.6%, The Royal Bank of Scotland (LSE:RBS) 4.4%, HSBC (LSE:HSBA) 9% and Standard Chartered (LSE:STAN) 4.9%.

"From a technical perspective, it also begs the question of how or whether these share prices will be compensated for the previous ex-dividend markdowns. On ex-dividend day, share prices are reduced by the amount of the upcoming dividend, which already applies to Barclays and HSBC (both 27th February), Standard Chartered (5th March) and Royal Bank of Scotland (26th March). It is unclear whether this can be reversed.

"In addition, if the European experience is applied, the announcement of dividend and share buyback postponements had the effect of wiping off the supposed savings from the share prices and therefore market capitalisation of the banks in question. In early trade in the UK, that seems to have been echoed against a weaker market backdrop.

"Already facing the prospects of lower margins, given the historically low interest rate environment, as well as the possibility of an increase in bad loans (impairment losses), banks will face general economic challenges in their quest to keep the wheels of the economy oiled. However, they are undoubtedly in a significantly stronger capital position to withstand these shocks, following regulatory tweaks to their capital cushions after the financial crisis of over a decade ago.

"The announcement comes at a time when income investors are faced with a rapidly shrinking universe.

"As such, the search for dividend income may have to be found in switching to a classically defensive strategy.

"Companies such as Unilever could benefit from the current propensity of consumers to hunker down and currently yields around 3.4%. Similarly, Reckitt Benckiser (LSE:RB.) yields around 2.8%. Elsewhere, the utility stocks can come into their own in parts of the economic cycle such as these, and examples within the FTSE 100 include SSE (LSE:SSE) (previously Scottish & Southern Energy), where the current dividend yield is 7.1% and United Utilities (LSE:UU.) 4.6%.

"An interesting observation would be to look at another such sector in the form of the supermarkets. Investors can expect financial caution here also, particularly given the sector’s tendency to have diversified away from just grocery, but these are clearly reaping some rewards at present. Not always the highest of yielders, the dividends may be maintained in the face of current trading, with William Morrison (LSE:MRW) presently yielding 3.8%, Tesco (LSE:TSCO) 3% and Sainsbury's (LSE:SBRY) 5.4%.”

interactive investor dividend tracker

Company Future dividends suspended or Previous dividend cancelled Money saved  Date of dividend decision
Standard Chartered Both   01/04/2020
Royal Bank of Scotland Both   01/04/2020
HSBC Both   01/04/2020
Lloyds Banking Group Both   01/04/2020
Barclays Both   01/04/2020
QinetiQ Future   01/04/2020
Savills Previous   01/04/2020
Smiths Group Future   31/03/2020
AA Future   31/03/2020
James Fisher Previous   31/03/2020
St Modwen Props Previous £11.3m 31/03/2020
WPP future £150m 31/03/2020
Essentra Previous   27/03/2020
Provident Financial Previous £40m 27/03/2020
Marshalls Previous £27m 27/03/2020
Hill & Smith Previous   27/03/2020
Domino's Pizza Previous   27/03/2020
Flutter Deal   27/03/2020
Meggit Previous   27/03/2020
Rightmove Previous £38.3m 27/03/2020
Weir Group Previous   26/03/2020
British Land Future   26/03/2020
DFS Future £8m 25/03/2020
Mears Future   25/03/2020
Halfords Future £24m 25/03/2020
Bellway Future   25/03/2020
Persimmon both   25/03/2020
Rentokil Both   25/03/2020
Dunelm Previous   24/03/2020
Redrow Previous £37m 24/03/2020
Taylor Wimpey Previous £485m 24/03/2020
RPS Previous £4.5m 24/03/2020
Whitbread Future   24/03/2020
Aggreko Previous   23/03/2020
ITV Both £216m 23/03/2020
Stagecoach Future   23/03/2020
Go-Ahead Previous £13m 23/03/2020
Airbus Previous €1.4bn 23/03/2020
Kingfisher Future   23/03/2020
N Brown both   23/03/2020
Card Factory Future   23/03/2020
Greggs Previous £33.3m 23/03/2020
Lookers Future   23/03/2020
Filta Group Future   23/03/2020
IWG Previous   23/03/2020
M&S Future £130m 20/03/2020
InterContinental Hotels Both $150m 20/03/2020
Johnson Service Group Previous   20/03/2020
Wetherspoons Future £4.2m 20/03/2020
Travis Perkins Future   20/03/2020
Ford Future   19/03/2020
Elementis Both $33m 19/03/2020
Crest Nicholson Previous   19/03/2020
Playtech Previous €35m 19/03/2020
National Express Previous   19/03/2020
Heavitree Brewery Previous   19/03/2020
Quartix Holdings Previous   19/03/2020
Joules Future   19/03/2020
Croma Security Services Previous   19/03/2020
Portmeirion  Future £3.1m 19/03/2020
Marstons Future £20m 18/03/2020
Shoe Zone Previous   17/03/2020

Source: interactive investor - not exhaustive and whilE every effort has been made to keep this accurate, it should not be relied upon.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Get more news and expert articles direct to your inbox

Sign up for a free research account to get the latest news and discussion, and create your own virtual portfolio.

Free Sign Up