FTSE 100 dividends are forecast to fall 24%, or £18 billion, in 2020, according to AJ Bell.
A total of 35 firms have cut dividends for 2020 with Shell, HSBC and BP topping the list. In total that equates to a 24% or £18 billion reduction in dividend payments this year compared to last year.
But, even after the cuts the FTSE 100 is still expected to yield 3.5% for 2020.
BAT is now set to be the biggest dividend payer this year. M&G, Imperial Brands and Aviva are the three highest yielding stocks in the index – all 10% or higher.
Earnings cover for dividends is still thin at 1.42x across the index (a pay-out ratio of 70%).
“After further dividend cuts and reductions in analysts’ estimates, FTSE 100 dividend payments are forecast to fall 24%, or £18 billion, in 2020 after an 11% drop in 2019, leaving the total at its lowest level since 2012, comments Russ Mould, investment director at AJ Bell. “That means the FTSE 100 is currently expected to yield 3.5% for 2020, increasing to 4.2% in 2021.
“Dividend forecasts for the year have slipped by a further 10% in the third quarter to £56.5 billion from £62.3 billion in June (and £91.1 billion in January). This is largely the result of BP’s decision to slash its second-quarter dividend in half, delivering a huge blow to income-seekers.
“As a result, dividend payments are now expected to fall for two consecutive years before starting to forge a recovery in 2021.”