FTSE 100 dividends paid and restored now exceed value of cuts since the pandemic began

Russ Mould
1 March 2021

“Lily James, Carey Mulligan and Ralph Fiennes may be gripping the nation in the Netflix film The Dig, but it is treasure of a different kind that is keeping investors interested in the UK stock market, after a bumper month for dividend payments in February,” says Russ Mould, AJ Bell Investment Director.

“Payment declarations came to £14.6 billion, while a further £5.2 billion worth of dividends were restored, against just £2.7 billion of cuts. A further three firms – Hays, Avingtrans and Beazley – also declared their intention to restore dividends shortly, to further boost the income received by investors in the UK stock market.

“The aggregate of dividends paid and restored has also now exceeded the value of those cut or cancelled over the past 12 months, 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

 

 

 

 

 

2020

47,820

32,795

3,921

36,716

2021 to date

2,739

15,731

5,296

21,027

TOTAL

50,559

48,526

9,217

57,743

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 February, with a value of almost £1.5 billion – and Berkeley and Rightmove have yet to quantify the amount of stock that they intend to purchase.

“While there is no denying that the economic backdrop is a very difficult one, income-seekers have at least passed a key test this month, since BP and Shell paid out dividends that were lower than those of a year ago. That weighed heavily and the oil majors represented more than 90% of February’s total dividend reduction between them, with Evraz the only other FTSE 100 member to prune back its distribution, on a year-on-year basis. 

“The good news is that Shell cut last April and BP last August, so the base for comparison gets easier for the next quarter or two, before the bar starts to rise once more.

“The miners led the charge, with big increases in pay-outs in February at BHP, Anglo American and Rio Tinto. Rio also declared a special dividend.

“All of the Big Five banks returned to the dividend list, too. However, only HSBC exceeded expectations with its $0.15-a-share payments and NatWest, Barclays and Standard Chartered all undershot analysts’ forecasts. 

“As a result, it looks like the miners became the single-biggest dividend paying sector within the FTSE 100 in 2020. Polymetal, Fresnillo and Antofagasta’s dividend declarations for 2020 will have a say but it is the diggers who really are unearthing the treasure now for investors in UK equities, especially as the current surge in raw material and metals prices bodes well for their 2021 payments, too.

 

Dividends (£m)

% of FTSE 100 total

Dividend yield (%)

 

2020E

2021E

2020E

2021E

2020E

2021E

Banks

3,327

7,657

5.3%

10.4%

2.0%

4.6%

Insurers

3,850

3,958

6.2%

5.4%

4.2%

4.3%

Other financials

2,273

2,361

3.6%

3.2%

2.0%

2.0%

Support services

1,462

1,541

2.3%

2.1%

1.6%

1.7%

Mining

9,822

13,709

15.8%

18.6%

4.4%

6.1%

Food Producers

3,859

4,361

6.2%

5.9%

3.2%

3.6%

Food Retailers

1,255

1,111

2.0%

1.5%

2.3%

2.1%

General Retailers

249

539

0.4%

0.7%

0.8%

1.8%

Consumer Staples

8,015

8,362

12.9%

11.3%

5.2%

5.4%

Technology

420

513

0.7%

0.7%

0.9%

1.1%

Telecoms

2,163

2,955

3.5%

4.0%

4.5%

6.2%

Travel & Leisure

46

616

0.1%

0.8%

0.1%

0.7%

Real Estate

568

720

0.9%

1.0%

2.8%

3.5%

Oil & Gas

8,597

7,432

13.8%

10.1%

5.5%

4.7%

Pharma / Healthcare

7,047

7,154

11.3%

9.7%

3.9%

4.0%

Media

1,321

1,711

2.1%

2.3%

2.3%

3.0%

Utilities

3,334

3,409

5.4%

4.6%

5.3%

5.4%

Industrials

2,041

2,123

3.3%

2.9%

2.4%

2.5%

Construction & Mats

1,323

2,161

2.1%

2.9%

2.2%

3.6%

Personal / Household

1,315

1,387

2.1%

1.9%

2.5%

2.7%

FTSE 100

62,286

73,779

100.0%

100.0%

3.3%

3.9%

Source: Company accounts, analysts’ consensus forecasts, Marketscreener, Sharecast

“The banks are a key variable and they could yet disappoint, especially if the economic recovery proves to be weak, low interest rates weigh on loan books’ net interest margins, the lenders have to take further substantial provisions or the regulator intervenes once more. 

“The banks are still expected to be a key driver of dividend growth in the FTSE 100, but if they stumble then the miners might have to take up the slack. These two sectors underpin consensus analysts’ forecasts of a 19% increase in FTSE 100 dividends to £73.8 billion in 2020, enough for a dividend yield of almost 4%, and they above all others must be watched carefully by income seekers this year.

 

Percentage of

 

 

Percentage of

 

FTSE 100 dividends paid

 

 

FTSE 100 dividend growth

 

2020 E

2021 E

 

 

2020 E

2021 E

Consumer Staples

21%

19%

 

Financials

(20%)

39%

Financials

15%

19%

 

Mining

(5%)

34%

Mining

16%

19%

 

Consumer Discretionary

(11%)

10%

Oil & Gas

14%

10%

 

Industrial goods & services

8%

9%

Health Care

11%

10%

 

Consumer Staples

10%

8%

Industrial goods & services

8%

8%

 

Telecoms

(5%)

7%

Consumer Discretionary

5%

5%

 

Real estate

0%

1%

Utilities

5%

5%

 

Health Care

(1%)

1%

Telecoms

3%

4%

 

Technology

(0%)

1%

Real estate

1%

1%

 

Utilities

1%

1%

Technology

1%

1%

 

Oil & Gas

(78%)

(10%)

Source: Company accounts, analysts’ consensus forecasts, Marketscreener, Sharecast

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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