Income investors are in the middle of a week that will tell them whether the five biggest dividend payers in the FTSE 100 intend to keep making shareholder payments, or whether they will scrap them and decide to preserve cash because of the coronavirus slowdown.
British American Tobacco, BP, HSBC, GlaxoSmithKline and Royal Dutch Shell paid out £8.4bn in dividend payments at the last quarter, and a similar amount is up for grabs this week alone. In fact, almost a fifth of the FTSE 100 are providing some sort of trading update this week.
The payouts from these firms have become more important than they already are, because almost a fifth of all FTSE 100 companies have announced dividend cuts over the past year.
The pace of dividend cuts accelerated since the FTSE 100 slumped to its lowest point in over 25 years last month. In March, dividends worth £15.4bn were cut, deferred, suspended or cancelled altogether for either 2019 or 2020, while firms committed to paying just £1bn. A brutal end to the month, when over £10bn of payments were passed by the Big Five FTSE 100 banks — HSBC, Barclays, Royal Bank of Scotland, Lloyds and Standard Chartered.
“We have seen many dividends delayed or cancelled already as companies look to preserve cash in order to protect themselves against a cessation in business, and there will be much more,” chief executive of Link Group’s global corporate markets division, Susan Ring.
HSBC has already declared that it will not pay a dividend of any kind in 2020 while GlaxoSmithKline remains committed to an unchanged 80p-per-share full-year pay-out, and announces its first-quarter results at noon (BST) on Wednesday in London.
Meanwhile, both British oil majors appear committed to their annual dividends. Shell’s last cut is said to date back to the 1940s — it reports its first-quarter results on Thursday. BP’s came ten years ago in the wake of the Deepwater Horizon oil rig disaster in the Gulf of Mexico, and on Tuesday promised to pay its £1.7bn dividend. British American Tobacco is also expected to reveal its plans on Thursday.