Friday 27 March 2020 12:43 pm

Coronavirus dividend cuts produce £4.4bn hit to investor portfolios

With more UK firms announcing coronavirus-fuelled dividend cuts this week, the total loss of investor income so far this year is now £4.4bn.

The pace of dividend cuts is accelerating as coronavirus wreaks havoc on world economies. In March 116 companies have suspended their dividends totalling £4.2bn, according to investment fund AJ Bell. That compares to three in February and only two in January.

Read more: ITV drops dividend and outlook as pandemic hits advertising

It represents a big blow to savers and portfolio builders as interest rates on cash have hit historic lows.

Domino’s Pizza announced a dividend cut this morning of £25.7m, despite increased demand in the face of the coronavirus pandemic.

Britain’s biggest pizza delivery firm said “the volatility of delivery sales” and “an uncertain outlook” had required “a cautious and prudent approach”.

Shares in Domino’s are up 5.17 per cent and Russ Mould, investment director at AJ Bell, said investors may be relieved over some dividend cuts. He pointed to Kingfisher, which is trading up despite a dividend cut of £158m.

The B&Q owner revealed the cut earlier this week but said it is keeping its stores in the UK open despite temporarily shutting shops in France and Spain. It is also bolstering its online home delivery and click and collect capacity.

“If a dividend cut is part of the near-term price that must be paid to ensure a firm’s long-term survival or avoid a major rights issue or debt-for-equity swap, then investors may well come to accept it, even if the loss of the precious payments is a big blow,” Mould said.

Halfords also suspended its dividend this week after forecasting a 25 per cent drop in sales amid the pandemic.

The retailer said it anticipates a sharp drop in sales, of around £300m, following the government’s tightening of restrictions

Richard Hunter, Interactive Investor’s head of markets said: “A score of companies who have already reduced, deferred or cancelled their dividends is ample proof that in terms of financial prudence, the lack of a dividend payment in the short term (not applicable to those already announced as above) is already becoming an entrenched feature of UK PLC.”

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Further coronavirus dividend cuts to come

Analysts warned the number of coronavirus dividend cuts will only increase as the impact of the Covid-19 outbreak worsens in the UK.

Giles Coghlan, currency analyst at forex trader HYCM, told City A.M.: “We can expect a further flurry of dividend cuts, downward earnings revisions and closures in the entertainment and hospitality sectors.”

Helal Miah, investment research analyst at The Share Centre, predicted some big names announcing dividend cuts over the next few months. Those could include BP, Shell and some of the big banks.

Read more: Shell and Total slash costs and suspend buybacks amid oil price slump

“Even before the price collapse in oil, BP and Shell were relatively stretched and paying out fairly hefty dividends compared to earnings,” Miah said. Earlier today, Shell announced it is cutting back on capital expenditure and halting its share buyback programme.

“Given the Financial Conduct Authority (FCA) announcement [to suspend results for two weeks] we won’t be getting full-year results but what may happen is some companies announcing dividend cuts separately,” Miah said.

Read more: Travis Perkins suspends dividend and delays Wickes de-merger

The financial watchdog said: “The unprecedented events of the last couple of weeks mean that the basis on which companies are reporting and planning is changing rapidly.”

Coronavirus dividend cuts so far:

DateCompanyDividend cut/deferral
27-Mar-20Meggitt£92.9m
27-Mar-20Provident Financial£40.5m
27-Mar-20Rightmove£38.4m
27-Mar-20Essentra£38m
27-Mar-20Balfour Beatty£37.3m
27-Mar-20Marshalls£27.2m
27-Mar-20Domino’s Pizza£25.7m
27-Mar-20FDM Group£20.2m
27-Mar-20Hill & Smith£18.3m
27-Mar-20Coats£16.3m
27-Mar-20Clarkson£16.1m
27-Mar-20Photo-Me International£14m
27-Mar-20Mitie£9.8m
27-Mar-20Keystone Law£2.1m
27-Mar-20Alumasc£1.1m
27-Mar-20Finsbury Foods£400,000
26-Mar-20Weir£78.8m
26-Mar-20British Land£74m
26-Mar-20Howden Joinery£54.3m
26-Mar-20Senior£21.9m
26-Mar-20SIG£14.8m
26-Mar-20Ocean Wilsons£14.1m
26-Mar-20James Fisher£11.8m
26-Mar-20Non-Standard Finance£7.2m
26-Mar-20STV£5.8m
26-Mar-20Vianet£2.6m
26-Mar-20Topps Tiles£2.2m
26-Mar-20Hostelworld£1.7m
26-Mar-20Hargreaves Services£900,000
26-Mar-20Ince£700,000
26-Mar-20Mpac£300,000
26-Mar-20Van Elle£200,000
25-Mar-20Persimmon£751.8m
25-Mar-20Unite£120.5m
25-Mar-20Renishaw£10.2m
25-Mar-20MJ Gleeson£6.6m
25-Mar-20Barratt Developments£99.8m
25-Mar-20Vistry£89.3m
25-Mar-20Polypipe£16.3m
25-Mar-20Rentokil£67.3m
25-Mar-20SSP Group£26.8m
25-Mar-20Ibstock£26.8m
25-Mar-20Halfords£24.7m
25-Mar-20Cairn Homes£19.3m
25-Mar-20Morgan Sindall£17.3m
25-Mar-20Headlam£14.8m
25-Mar-20Biffa£13.4m
25-Mar-20Dalata Hotels£12.3m
25-Mar-20Vitec£12.2m
25-Mar-20ears£10.7m
25-Mar-20DFS Furniture£7.9m
25-Mar-20Epwin£4.5m
25-Mar-20Wilmington£3.7m
25-Mar-20Volution£3.4m
25-Mar-20McBride£1.5m
25-Mar-20Animalcare£1.4m
25-Mar-20Walker Greenbank£1.4m
25-Mar-20Michelmersh Brick£1.1m
24-Mar-20Taylor Wimpey£485.7m
24-Mar-20Whitbread£90.1m
24-Mar-20Bellway£64.1m
24-Mar-20Redrow£37m
24-Mar-20Grafton£29.7m
24-Mar-20Shaftesbury£27.7m
24-Mar-20Dunelm£16.2m
24-Mar-20Forterra£14.8m
24-Mar-20Secure Trust Bank£12.4m
24-Mar-20RPS£4.5m
24-Mar-20Vertu Motors£4.1m
24-Mar-20Gately£3.4m
24-Mar-20Learning Technologies£3.3m
24-Mar-20Mortgage Advice Bureau£3.3m
24-Mar-20Zotefoams£2.1m
24-Mar-20Abbey£1.9m
24-Mar-20Springfield Properties£1.4m
24-Mar-20James Cropper£1.1m
24-Mar-20Applegreen£1m
24-Mar-20K3 BusinessTech£800,000
24-Mar-20Cambria Autos£300,00
23-Mar-20ITV£216.2m
23-Mar-20Kingfisher£158m
23-Mar-20Aggreko£46.5m
23-Mar-20IWG£41.8m
23-Mar-20Stagecoach£22.3m
23-Mar-20Card Factory (2nd)£21.9m
23-Mar-20Go-Ahead£13m
23-Mar-20N Brown£12m
23-Mar-20Lookers£6.1m
23-Mar-20Marshall Motors£4.5m
23-Mar-20The Works£1.5m
23-Mar-20Synetics£600,000
23-Mar-20Filta£300,000
23-Mar-20Colefax£300,000
23-Mar-20Bonhill£300,000
20-Mar-20Marks & Spencer£132.6m
20-Mar-20Intercontinental Hotels£120.4m
20-Mar-20Travis Perkins£83.2m
20-Mar-20Johnson Service£8.7m
20-Mar-20JD Wetherspoon£4.2m
19-Mar-20Crest Nicholson£56m
19-Mar-20Playtech£33.9m
19-Mar-20Elementis£26m
19-Mar-20NewRiver Reit£16.5m
19-Mar-20PPHE Hotel£8.5m
19-Mar-20Portmieirion£3.1m
19-Mar-20Gym Group£1.6m
19-Mar-20Shepherd Neame£900,000
18-Mar-20MicroFocus£165.1m
18-Mar-20McCarthy & Stone£18.8m
18-Mar-20Marston’s£17.8m
18-Mar-20Restaurant Group£12.4m
16-Mar-20William Hill£46.7m
16-Mar-20Shoe Zone£4m
11-Mar-20Costain£12.3m
11-Mar-20Dignity£12.2m
10-Mar-20John Menzies£12.2m
26-Feb-20McColl’s Retail£700,000
25-Feb-20Hammerson£91.2m
12-Feb-20Intu£62.3m
09-Jan-20Card Factory£17.1m

Source: AJ Bell

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