FTSE 100 dividend payments continue to outpace cuts and cancellations in March

Russ Mould
1 April 2021

“Next may have disappointed a few optimistic analysts who had expected the retailer to declare a full-year dividend but in March the number of UK-listed firms that made or restored payments to investors once more comfortably exceeded those who cut them,” says Russ Mould, AJ Bell Investment Director.

“Payment declarations came to £7.2 billion, while a further £0.7 billion worth of dividends were restored, against just £0.3 billion of cuts. Royal Mail also flagged it would declare a one-off dividend of 10p a share, worth some £100 million, alongside its full-year results in May.

“The aggregate of dividends paid and restored now exceeds the value of those cut or cancelled since COVID-19 swept around the world by £14.7 billion, or nearly 30%, to suggest that companies really do feel the worst may be behind us, in terms of the pandemic and the economic downturn.

 

UK dividend payments

 

£ million

£ million

£ million

£ million

 

CUT

KEPT

RESTORED

Kept + restored

Mar-20

15,217

1,020

0

1,020

Apr-20

10,967

8,423

0

8,423

May-20

5,012

3,674

0

3,674

Jun-20

638

1,967

0

1,967

Jul-20

5,216

6,791

1,105

7,896

Aug-20

4,148

3,294

1,314

4,608

Sep-20

1,191

582

605

1,187

Oct-20

4,243

2,011

133

2,144

Nov-20

776

4,793

609

5,402

Dec-20

412

240

155

395

Jan-21

27

1,141

91

1,232

Feb-21

2,712

14,590

5,205

19,795

Mar-21

307

7,182

706

7,888

 

 

 

 

 

2020

47,820

32,795

3,921

36,716

2021 to date

3,047

22,915

6,001

28,917

TOTAL

50,867

55,710

9,922

65,633

Source: Company accounts

“Share buyback activity picked up, too, putting a little more cash in investors’ pockets. A dozen companies announced new buybacks schemes in March, with a value of £2.2 billion. That included four FTSE 100 firms – NatWest, Sage, Ferguson and CRH – and buybacks with a value of £3.6 billion have already been declared in 2021 overall.

“Uncertainty over new waves of the virus in Europe mean the scenario of a robust economic recovery is by no means certain to play out, while the base for comparison on a year-on-year basis is about to reach its softest point. 

“Dividend cuts peaked last March as firms responded swiftly to the pandemic and the bulk of the damage, from the narrow perspective of investors, had been done by July. 

“The comparisons will get tougher from there and investors will then be back to measuring not whether a firm has cut, kept or restored a payment but how distributions measure up to analysts’ forecasts – not that the absence of a dividend appears to be doing Next any harm today, in the wake of the retailer’s latest profit forecast upgrade, which will help to give some basis to analysts’ estimates for dividends in the year to January 2022.

 
Source: Company accounts, Marketscreener, consensus analysts’ forecasts

“However, even the consensus forecast for Next’s 2022 dividend of 169p a share means the retailer is not a huge contributor to the overall pay-out pot from the FTSE 100. If Next does make such a payment, it would be worth just over £200 million, compared to the current aggregate consensus forecast from the FTSE 100 of £74.3 billion in dividends for 2021.

 
Source: Company accounts, Marketscreener, consensus analysts’ forecasts

“Next is currently expected by analysts to be the sixtieth biggest payer in 2021. The top ten between them forecast to provide 49% of the total and the top 20 some 69%, so when it comes to measuring the overall yield of the FTSE 100, these are the names that must be watched most closely.

 

2021 E

 

Dividend (£ million)

Dividend yield (%)

Dividend cover (x)

Rio Tinto

7,035

10.1%

1.30x

British American Tobacco

4,979

8.1%

1.58x

Royal Dutch Shell

3,994

3.4%

1.87x

GlaxoSmithKline

3,982

6.1%

0.89x

Unilever

3,883

3.7%

1.28x

BHP Group

3,424

7.6%

1.21x

HSBC

3,229

3.8%

1.45x

BP

3,058

4.8%

1.24x

AstraZeneca

2,648

2.8%

1.29x

Vodafone

2,074

5.5%

0.89x

Anglo American

1,964

4.8%

2.64x

National Grid

1,789

5.9%

1.15x

Glencore

1,536

4.0%

2.25x

Diageo

1,501

2.1%

1.59x

NatWest Group

1,332

5.9%

0.73x

Imperial Brands

1,322

9.8%

1.29x

Reckitt Benckiser

1,243

2.8%

1.64x

Legal and General

1,074

6.2%

1.67x

Lloyds

1,063

3.6%

2.00x

RELX

944

2.8%

1.39x

Source: Consensus analysts’ forecasts, Marketscreener, Refinitiv data

“Miners, banks and consumer staples dominate, although the oils still have a major role to play. Although Unilever, Reckitt Benckiser and Diageo should offer a welcome degree of predictability, the other three could all do with a strong economic recovery, if there are any stumbles along the way then perhaps those investors who are seeking income from UK equities will start to become more nervous again, even if the first three months of 2021 have offered them much encouragement, as well as welcome cash.”

Russ Mould
Investment Director

Russ Mould’s long experience of the capital markets began in 1991 when he became a Fund Manager at a leading provider of life insurance, pensions and asset management services. In 1993 he joined a prestigious investment bank, working as an Equity Analyst covering the technology sector for 12 years. Russ eventually joined Shares magazine in November 2005 as Technology Correspondent and became Editor of the magazine in July 2008. Following the acquisition of Shares' parent company, MSM Media, by AJ Bell Group, he was appointed as AJ Bell’s Investment Director in summer 2013.

Contact details

Mobile: 07710 356 331
Email: russ.mould@ajbell.co.uk

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