Dividend cuts by UK companies this year exceed £30 billion

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Dividend cuts and deferrals have now topped £30bn leaving income investors with a large hole in their portfolios. While some investors might be hoping the end is in sight for these cuts, they could actually increase now the Government has bought in stricter measures banning firms using its loan scheme from paying out dividends to investors.

Half of investors* questioned by AJ Bell say that dividend cuts have hit their portfolios and reduced the income they’re getting. On average investors say they’ve seen their income cut by 27%, which means that someone who is reliant on their income to fund their retirement has effectively taken a 27% pay cut. But some have been hit far harder, with 40% seeing dividend cuts of 30% or more and one in five investors saying they’ve seen their investment income cut by 50% or more.

Those who rely on their investments to fund their lifestyle will now be faced with a really difficult choice, of selling some units of their investments to make up the shortfall – potentially at a loss considering current market conditions – or face a cut to their income, meaning they need to cut their outgoings.

What’s more, 12% of investors say they don’t know if their investment income has been hit, suggesting they may be fund investors who have yet to see what impact the cull of dividends will have on their holdings. Some income fund managers have predicted income cuts of 40% or more, while others are more optimistic. Either way, some investors are in for a shock when the next payout from their funds arrives.

With income hard to find at the moment, investment trusts with an income focus could shine compared to their fund rivals. Trusts are able to withhold up to 15% of their income from previous years to supplement payouts in leaner years and many have built up decent reserves they will be able to dip into for the current year. Already some trust boards have committed to maintaining the current dividend – if not grow it – this year, meaning these investors will be shielded from the dividend cuts for the current year.

Stock investors can commit more of their cash to those companies who have pledged to keep paying out dividends in the current year, in order to help shield from some of the income fall. So far 140 companies have committed to maintaining £12.3bn in dividends – including 26 FTSE 100 firms. The likes of BP, Sage, Vodafone, GlaxoSmithKline, Diageo and Tesco have all committed to their payouts in the coming year, meaning income investors still have options.

FTSE 100 firms maintaining dividends

Company Dividend maintained (£ million) 
BP 1,715.9 
Vodafone 1,056.8 
GlaxoSmithKline 953.2 
Legal and General 754.0 
Diageo 702.2 
Tesco 636.6 
SSE 582.0 
Prudential 543.7 
Anglo American 518.7 
CRH 437.5 
Unilever 424.3 
3i 340.6 
Standard Life Aberdeen 326.4 
CCH 208.7 
London Stock Exchange Group 175.4 
Admiral 165.5 
Smith & Nephew 163.2 
SEGRO 157.9 
Hargreaves Lansdown 148.0 
Berkeley Group 124.9 
Pearson 101.6 
DCC 94.3 
Hikma Pharmaceuticals 72.7 
Croda 65.1 
SAGE 64.7 
Spirax-Sarco Engineering 57.4 

Full income survey results

Have dividend cuts reduced your investing income? %
Yes 49%
No 39%
Don't know 12%
If yes, approximately how much dividend income have you lost? %
10% 13%
20% 15%
30% 13%
40% 8%
50% 7%
More than 50% 14%
Not sure 29%

Source: AJ Bell Youinvest survey of 1,124 customers between 01/05/20 - 06/05/20

* AJ Bell Youinvest survey of 2,310 customers between 01/05/20 - 06/05/20

For more information on UK-listed companies which have cut, suspended, or deferred dividend payments, take a look at our Dividend tracker.

These articles are for information purposes only and are not a personal recommendation or advice.


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Written by:
Laura Suter

Laura Suter is Personal Finance Analyst at AJ Bell. She is a multi-award winning former financial journalist, having specialised in investments. Laura joined AJ Bell from the Daily Telegraph, where she was investment editor. She has previously worked for adviser publications Money Marketing and Money Management, and has worked for an investment publication in New York. She has a degree in Journalism Studies from University of Sheffield.