Misery for investors as FTSE giants cut dividends by almost £24bn

Shell has cut its dividend for the first time since the second world war. Photo: Getty

Coronavirus has caused the UK’s largest companies to slash their dividend payouts to shareholders by a whopping £24bn.

Stats provided by broker AJ Bell show that since the start of the outbreak there have been 42 cuts by FTSE 100 companies totalling £23.8bn.

The cuts are a hammer-blow to investors who had hoped at the start of the year that the FTSE 100 would pay out around £91.5bn in 2020.

The latest firm to cut its dividend was BT (BTA). On Thursday, the telecoms firm said that by suspending the dividend for two years it hopes to save £3.3bn. It is the first time BT has suspended its full year payout since it was privatised in the 1980s.

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Other firms that have cut their dividends include Shell (RDS) – it is the first time that the oil major has done so since the Second World War. Shell was the top dividend payer in the FTSE 100 for seven of the past eight years.

There are fears among financial analysts that rival BP (BP) could be next in line. Banks and insurers have also cut their dividends after pressure from the government.

Russ Mould, investment director at AJ Bell, said: “There has to be a good chance that it takes UK dividends a while to get back to their 2018 high. It is possible that the massive fright caused by the viral outbreak persuades company management teams to focus on cash.

“Managers breathe more easily but shareholders get lower profits, lower returns on equity and less dividend growth, perhaps with the result that dividends do not return to 2019’s levels for some time. 

“Moreover, Government is providing support to many firms through multiple schemes. It may exact a price in the future. Banks and insurers have already been asked by regulators to cancel dividends and buyback programmes.”

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But there are some companies that could still prove reliable, these include Unilever (UL) and Diageo (DEO), while drug companies such as GlaxoSmithKline (GSK) and AstraZeneca (ASTRA) may yet benefit from the coronavirus outbreak.

Grocer Tesco (TSCO) is also in rude health, as food sales have spiked during lockdown.

Mould added: “Tesco is even talking of a special dividend payment for the second half of the year. That suggests the regular payments are safe, as does strong underlying trading.”