Interactive Investor

UK dividend payment forecast for 2020 cut by a third

1st July 2020 14:52

Tom Bailey from interactive investor

In total, 48 companies in the FTSE 100 index have cut, deferred or cancelled payments owing to coronavirus as businesses move to shore up their balance sheets

The FTSE 100 is expected to pay £30 billion less in dividends in 2020 than was originally forecast at the beginning of the year, according to new analysis.

The renewed forecast of £62 billion, made by AJ Bell, represents a steep downgrade from January’s prediction that dividend payments would amount to £92 billion for the year.

The fresh forecast represents a fall of 17% compared to the year prior. In addition, it marks a  six year low for annual dividend payments.  

In total, 48 companies in the FTSE 100 index have cut, deferred or cancelled payments owing to coronavirus as businesses move to shore up their balance sheets.

Not all companies are expected to cut or defer their dividend payments. According to AJ Bell, 46 companies are still expected to increase their dividend payments, compared to the 30 companies that have, so far, made the decision to cut their payments (other firms have decided to defer or cancel payments).

As Russ Mould, investment director at AJ Bell notes: “Currently, some 46 FTSE firms are expected to increase their dividend and just 30 cut them in 2020 but the cuts tend to be much deeper and come from firms whose contribution to the overall pot was so much bigger.”

This once again highlights the risk that the FTSE 100’s high dividend concentration ratio in recent years has created. The figures also show that just 10 firms are expected to generate just over half of the index’s remaining payments in 2020, while just 20 stocks forecast to pay three-quarters of the total.

The index now yields 3.6%, down from yielding over 4% for much of 2019.

This article was originally published in our sister magazine Money Observer, which ceased publication in August 2020.

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