There is also significant concentration risk in income funds
Thursday 23 Jul 2020 Author: James Crux

UK dividends plunged 57% in the second quarter and could see a 40% decline across the whole of 2020, according to financial administrator Link.

Second quarter dividends fell by 57.2% to £16.1 billion on a headline basis (including special dividends). Excluding specials, exceptionally high this time last year, the decline was 50.2% to £16 billion.

Link’s best-case scenario now sees dividends falling 39% to £60.5 billion on an underlying basis this year and 43% to £56.3 billion on a worst-case basis.

Meanwhile, Octopus Investments warns significant concentration risk remains across the Investment Association UK Equity Income Sector with a large proportion of funds relying on the same stocks to generate income.

Eighty percent of funds in the sector hold GlaxoSmithKline (GSK) and nearly half (46%) hold British American Tobacco (BATS). AstraZeneca (AZN) and Rio Tinto (RIO) feature as a major position in 37% of the income funds.

Oil and gas is less popular with the number of funds in the income sector holding Royal Dutch Shell (RDSB) as a top 10 position halving between January and May to 36%. This is a result of Shell cutting its dividend.

BP (BP.) is the third most widely held stock in the sector despite growing expectations for it to cut dividends in August.


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