The forecast dividend pay-out for the FTSE 100 has fallen from £91 billion in January to £62 billion in June, a new study has found.
This would represent a 17% fall in the pay-out in 2020 compared to the previous year after an 11% drop in 2019, leaving the total at its lowest level since 2014.
Index currently offering a 3.6% dividend yield after 48 FTSE 100 firms have cut, deferred or cancelled a dividend payment and 49 have maintained or increased one for either fiscal 2019 or fiscal 2020
BP is now expected to be the biggest single dividend payer.
Earnings cover for dividends is still thin at 1.40x across the index (a pay-out ratio of 72%). Just ten firms are expected to generate 55% of 2020’s total £62.3 billion payment, with twenty stocks forecast to pay three-quarters of the total.
Aviva, M&G and BP are the three highest yielding stocks in the index – all in excess of 10% – but the record of firms that had on paper offered a 10%-plus yield in actually making those payments is poor.
Russ Mould, investment director at AJ Bell said, “The FTSE 100 is currently expected to yield 3.6% for 2020, down from the 4.7% the index was expected to yield at the beginning of the year. Dividend forecasts for the year have slumped by a third from £91.1 billion in January to £62.3 billion in June as 48 members of the index have cut, deferred or cancelled payments thanks to the COVID-19 viral outbreak.
“As a result, dividend payments are now expected to fall for two consecutive years before starting to forge a recovery in 2021.
“Currently, some 46 FTSE firms are expected to increase their dividend and just 30 cut them in 2020 but the cuts tend to be much deeper and come from firms whose contribution to the overall pot was so much bigger.”