Miner BHP Group PLC’s (LON:BHP) 30% dividend cut and on Tuesday means 32 FTSE 100 companies have trimmed their payout for the first half of 2020, though housebuilder Persimmon PLC (LON:PSN) made a modest returning to the dividend list.
The lack of a clear trend in shareholder returns was typified by the blue-chip miners, with Glencore (LON:GLEN) having scrapped payouts, Anglo American (LON:AAL) also cutting its dividend, but Rio Tinto (LON:RIO) having been a hiker.
Despite prices for BHP’s core metals holding up, its profits were hit by the decline of oil and coal prices.
What’s more, investors who have been paying attention to companies with low dividend cover would have been steering clear of a company with 1.2 times cover last year.
This meant a cut “was hard to avoid”, said Kit Atkinson, head of capital markets at Link Group, noting that it will save BHP around £800mln in 2020 alone.
BHP’s dividend cut was the eighth biggest, noted analysts at AJ Bell, but its shares remain one of the best performers on the FTSE 100 since the end of April.
So, as the first-half results season draws to a close and almost a third of London’s blue chips have cut, cancelled, suspended or deferred their dividend for the first half, AJ Bell investment director Russ Mould saw some silver linings, with 24 Footsie firms having kept or increased their payouts, including Persimmon (LON:PSN) today, and “perhaps most tellingly” six have restored them.
“This means the news flow is not quite as grim as it could have been, although the cuts have still cost investors £13.8bn of precious income, while the retentions and restorations have come to £10.7bn so far.’
A further three big caps did not declare an interim dividend, which is commonplace for Coca-Cola HB (LON:CCH) and IAG, “which has plenty more on its plate besides”, while index newcomer Just Eat Takeaway.com (LON:JET) is a tech stock that has yet to join the dividend list.
“The gathering number of dividend retentions, with Persimmon the latest, at least offers some support to the narrative that we are through the worst in terms of the economic downturn and the cycle of earnings and dividend forecast downgrades,” Mould says.
“However, a second wave of the pandemic, or even a series of local lockdowns, should they prove necessary, could knock consumer and investor sentiment as the FTSE 100 looks to make progress from the 6,000 mark which seems to be anchored to right now, having traded round that level since late April.
“Investors clearly do not know what is going to happen next and they are acting accordingly.”