Dividends dive – and some may never come back

More than a third of British companies have cut or scrapped dividends, and there will be more pain ahead. 

Marks & Spencer staff and customer © Marks & Spencer
Will the likes of M&S ever pay dividends again? © Marks & Spencer
(Image credit: Marks & Spencer staff and customer © Marks & Spencer)

Reinvested dividends are key to long-term returns. Unfortunately, there will be a lot less income to go round this year. About 40% of British companies have cut or scrapped dividends, including Shell and there is likely to be more pain ahead.

The dividend axe could cost pension funds and income investors nearly £85bn in lost income over two years, says Hugo Duncan in the Daily Mail. Almost half of UK dividends could be cut this year, implying a fall in overall payouts to £47.2bn for 2020. The US preference for share buybacks gives corporate America more flexibility when it needs to hoard cash, but Europe’s dividend payers have no such luck, says Mark Peden of Kames Capital.

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Markets editor

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019. 

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere. 

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful. 

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.