More Companies Cut Payouts as Slowdown Hits
Britain’s recession-hit companies are increasingly resorting to drastic cuts in dividends, inflicting a “double whammy” on investors already reeling from a slump of more than a third in leading shares over the past year.
Research obtained by The Times reveals that the proportion of Britain’s biggest companies cutting payouts to shareholders, measured relative to those increasing dividends, is rising as the recession takes its toll on profits.
Out of more than 100 groups tracked by Standard & Poor’s in their index of leading London-listed companies, 16 cut their dividend in the first quarter of this year, while 30 announced a rise. In the same quarter last year, 50 groups in the same index raised payouts while just one announced a cut, the research from S&P Capital IQ highlighted. The ratio of increases to cuts has shifted from fifty to one to two to one.
Rob Quinn, strategist at S&P Equity Research, believes that dividend returns for UK investors are headed in the direction of those in the US. S&P research shows that leading US groups cut $77 billion (£52 billion) of payouts in the first quarter, making it the worst quarter for dividends since 1955. Some 367 of 7,000 listed US companies cut their dividends, while a record low of 283 increased payouts.
The dividend crunch is a fresh blow to savers and investors, particularly those on fixed incomes such as pensioners, at a time of low interest rates.
Other companies are expected to follow suit. Last week, a research note from Morgan Stanley suggested that Marks & Spencer could halve its dividend when it reports results next month. The squeeze on dividend payouts comes as the recession hits profitability. In the US, the S&P 500 index of American bluechips is set to register its first ever negative quarter for earnings when results for the past three months are tallied up.
Mr Quinn also said that dividend cuts, once considered the corporate equivalent of dumping shares, are becoming more acceptable. Managers who maintain dividends at a time of poor performance are perceived as not facing up to reality, he said.
Research obtained by The Times reveals that the proportion of Britain’s biggest companies cutting payouts to shareholders, measured relative to those increasing dividends, is rising as the recession takes its toll on profits.
Out of more than 100 groups tracked by Standard & Poor’s in their index of leading London-listed companies, 16 cut their dividend in the first quarter of this year, while 30 announced a rise. In the same quarter last year, 50 groups in the same index raised payouts while just one announced a cut, the research from S&P Capital IQ highlighted. The ratio of increases to cuts has shifted from fifty to one to two to one.
Rob Quinn, strategist at S&P Equity Research, believes that dividend returns for UK investors are headed in the direction of those in the US. S&P research shows that leading US groups cut $77 billion (£52 billion) of payouts in the first quarter, making it the worst quarter for dividends since 1955. Some 367 of 7,000 listed US companies cut their dividends, while a record low of 283 increased payouts.
The dividend crunch is a fresh blow to savers and investors, particularly those on fixed incomes such as pensioners, at a time of low interest rates.
Other companies are expected to follow suit. Last week, a research note from Morgan Stanley suggested that Marks & Spencer could halve its dividend when it reports results next month. The squeeze on dividend payouts comes as the recession hits profitability. In the US, the S&P 500 index of American bluechips is set to register its first ever negative quarter for earnings when results for the past three months are tallied up.
Mr Quinn also said that dividend cuts, once considered the corporate equivalent of dumping shares, are becoming more acceptable. Managers who maintain dividends at a time of poor performance are perceived as not facing up to reality, he said.
quoted from: Times Online
