Dividend drought takes hold

With 45% of UK companies cutting dividends this year and more expected to follow, the economic shock from the pandemic has provided a setback to income investors. The Treasury has also announced that any companies borrowing over £50m through the Coronavirus Large Business Interruption Loan Scheme would be subject to restrictions, including a ban on dividend payments to shareholders (except where they were previously agreed). Research suggests over £52bn in company dividends are at risk in the UK this year*, the biggest impacted sector being banks. Defensive dividends are more likely to be safe, such as healthcare, food retail, basic consumer goods, and drink and tobacco.

*Link Assets, 2020