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06 Jan 2021 | 11:01

Crisis hits more than 500 UK company dividends

(Sharecast News) - More than 500 UK-listed companies scrapped, cut or suspended dividend payments in 2020 as the Covid-19 crisis threatened their finances, a survey showed. Dividends were hit at 505 companies including more than half the FTSE 100 and 117 of the FTSE 250, exchange traded fund provider GraniteShares said. Royal Dutch Shell and 51 other FTSE 100 groups were affected and 151 AIM-traded companies were forced to curtail payouts.

The coronavirus pandemic hammered the world economy, causing travel to seize up, shops and services to close and oil prices to plummet. The crisis hit company cash flows, prompting finance chiefs to cut or shelve shareholder payouts to protect balance sheets.

Big names affected included Shell, which cut its payout for the first time since the second world war, and BT, which suspended its dividend for the first time since privatisation in 1984.

Banks including HSBC and Lloyds and many insurers were also forced to cancel payouts under pressure from the Bank of England. Big investors gave the green light to companies to scrap or cut dividends to preserve their financial strength but HSBC's decision caused uproar among its small Hong Kong investors.

Will Rhind, GraniteShares' chief executive, said dividends would stay suppressed in 2021 despite the prospect of vaccines bringing the pandemic under control. The crisis has exposed the thin finances of many companies after a boom in dividend payments and share buybacks.

Rhind said: "The coronavirus crisis has had a devastating impact on dividends, and although we expect them to be higher this year than in 2020, they will not return to 2019 levels. We expect many companies to use the crisis as an opportunity to change their dividend policies, with many looking to pay less as they look to strengthening their balance sheets and increase their cash holdings."

Aviva reset its dividend in November by effectively cutting the payout to 21p from a planned payment of 30.9p for 2019 before the crisis forced it to cut. The Bank of England has allowed banks to restart paying dividends but within limits to conserve capital.





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