Interactive Investor

Vodafone among dozen blue-chips about to pay £4.4bn in dividends

Two of the UK’s biggest dividend payers return billions of pounds to investors in February, while long-suffering owners of BT are rewarded for their loyalty. City writer Graeme Evans has the details.

30th January 2024 13:50

Graeme Evans from interactive investor

The most talked-about dividend in the FTSE 100 index will be paid this month when Vodafone Group (LSE:VOD) and 11 other companies including BT Group (LSE:BT.A) hand shareholders £4.38 billion.

Friday’s 3.85p a share interim award worth £1 billion means Vodafone shares trade with a yield of more than 11%, a clear indicator the City thinks the payout is unsustainable.

A dividend not fully covered by earnings and the impact of Vodafone’s restructuring drive on future cash flow generation have added fuel to expectations of a cut.

Chief executive Margherita Della Valle has pledged to announce a review of Vodafone’s capital allocation priorities once 4.1 billion euros (£3.5 billion) is banked from the sale of its Spain operations in the first half of this year.

The annual dividend has been unchanged at a total of nine euros since the start of 2020, split equally between payments made in early February and August.

Changes in the pound-euro exchange rate mean UK shareholders have already felt a dividend cut, given that they got 3.95p a share last year and as much as 4.08p in August 2020.

The next highest yielding stock on February’s dividend payment list is British American Tobacco (LSE:BATS), which on Thursday is due to hand over the last quarterly instalment of 57.72p a share in relation to its 2022 performance.

The stock yields 9.2% after a 25% fall for shares in 2023, a decline not helped by the Lucky Strike owner revealing a £25 billion write-down on the value of some of its acquired US brands. 

The next day will see BT shareholders receive an unchanged dividend of 2.31p a share.

The award, which is in line with BT’s policy of paying 30% of the previous full year award, is the day after Allison Kirkby starts as chief executive. She takes over from Philip Jansen, with shares back at 113p, leaving the widely-held stock with a current yield of 6.7%. 

BT’s dividend is worth £230 million, part of £4.38 billion due in the accounts of blue-chip shareholders in February. That is significantly more than last year’s £3.2 billion due to one-off distributions by paper manufacturer Mondi (LSE:MNDI) and the discounter B&M European Value Retail SA (LSE:BME).

Mondi’s special dividend of about 136p on 13 February stems from the sale of its Russian assets, which generated proceeds of about 775 million euros (£660 million).

When companies pay a considerable proportion of their market capitalisation back to shareholders it is common to also carry out a share consolidation. This ensures the price stays at roughly the same level before and after the dividend payment. In Mondi’s case this will see 11 existing shares exchanged for 10 new ones.

At B&M, the 9 February payment of 20p a share is worth £201 million and follows the company’s strong trading over its Golden Quarter period. It also paid an interim dividend of 5.1p a share on 15 December. 

Most of February’s blue-chip dividends are being paid later this week, with United Utilities Group Class A (LSE:UU.), F&C Investment Trust Ord (LSE:FCIT), Experian (LSE:EXPN) and safety technology conglomerate Halma (LSE:HLMA) all making distributions.

There’s also £129 million due from accounting software group Sage Group (The) (LSE:SGE) on 9 February and £480 million from caterer Compass Group (LSE:CPG) on 29 February.

Source: interactive investor, SharePad. Data correct as at 29 January 2024.

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