Pandemic slashes UK dividends by two-fifths in 2020

Eight years of growth was wiped off UK dividends in 2020, according to the latest UK Dividend Monitor from Link Group.

Data showed that headline dividends fell by 44% to £61.9bn last year, or 38.1% to £61.1bn on an underlying basis, which excludes one-off specials.

Between the second and fourth quarter, Link’s figures showed that two-thirds of companies cancelled or cut their payouts (47% and 20% respectively), while just over a quarter increased them, and the remainder holding them steady. As a result of COVID-19, the cuts in dividends totalled £39.5bn at the end of the year.

The figures also revealed the biggest impact came from the financial sector, which accounted for two-fifths of the COVID-19 cuts between April and December – equating to £16.6bn of dividends cut or cancelled.

For 2021, Link suggested the resurgent pandemic and renewed lockdown has delayed the recovery in dividends, and CEO corporate markets, Susan Ring, suggested the figures were a “dreadful result for UK investors”, especially for those whom dividends are a major source of income.

“UK payouts have been more severely impacted than in most comparable countries because of their heavy concentration in the hands of just a few very large companies, mainly in the oil, mining and banking industries – all sectors that have had to cut dividends steeply,” Ring commented.
“There are reasons for optimism, but the resurgent pandemic has pushed back the reopening of the economy even further, especially in the UK. We still believe the worst is past, but a new lockdown means our expectations for 2021 are significantly more subdued. The biggest upside will come from the banks. They will only partially restore their dividends, but it matters more how quickly they do so, rather than exactly how much they pay.
“The social and economic scars of COVID-19 will be deep. We think it is highly unlikely dividends can regain their previous highs until 2025 at the earliest, and potentially even a year or two after that.”

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