Dividends at ten-year low but outlook brightens suggests data group Link

UK company dividend payments are set to fall by around 39% this year (2020), according to the latest forecast from data group Link.

Third-quarter payouts slumped by 49.1% on a headline basis to GBP18bn, which is the lowest since the comparable period in 2010 following the financial crash.

Excluding special dividends, payouts fell by 45% to GBP17.7bn with two-thirds of companies either cutting or cancelling payments, said Link.

Cuts amounted to GBP14.5bn and were led by banks, oil companies and miners, though travel, leisure businesses and retailers were also badly hit.

Link now estimates payments in 2020 will total GBP60.4bn on a best-case basis and GBP59.9bn on a worst-case scenario not including specials.

The picture for 2021 is better with Link forecasting an average increase of between 15% (best) and 6% (worst).

Comparisons should start to improve from next April, the anniversary of the lockdown, Link added.

Susan Ring, Corporate Markets CEO at Link said: “UK plc is not out of the woods, but the trees are perhaps thinning a bit.

“Our worst-case scenario has steadily improved all year and though UK investors face a historic decline in their income this year, the worst is now behind us.

“As companies become better able to assess the impact of the pandemic and the associated restrictions on their operations, some are restarting dividends and a handful are even making up some of the lost ground.”

By sector, Link said it does not expect oil dividends to increase significantly (if at all) in 2021 while the big question is whether the Bank of England permits the banks to begin paying out again.