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Investors should brace for further dividend cuts

2 April 2020

With the Bank of England putting pressure on banks to stop paying dividends, investors and pension savers should brace themselves for a sharp cut in dividends, as companies seek to protect themselves against the impacts of Coronavirus, Adrian Lowcock, head of personal investing at Willis Owen, has warned.

With the UK government forcibly closing millions of businesses in a bid to halt the spread of the pandemic, a raft of firms are likely to reduce their dividends, with the impact on retirement income set to be huge, according to Lowcock.

High street stalwart Marks & Spencer, ITV and Intercontinental Hotels are among the firms that have either slashed or cancelled their dividends so far.

A cut in dividend payments will place investors under even greater pressure, said Lowcock. “The speed of the impact of impact of coronavirus has left investors reeling and the policies being put in place to protect people have never been seen before. It has left entire industries unable to do business and put life for millions on hold.

“For investors there remains a lot of uncertainty, particularly those who rely on company dividends. The yields on some of the largest companies in the UK look eye watering, but it is hard to believe they are sustainable given the shock to global demand. Dividend cuts are inevitable. While it is understandable firms are looking to protect themselves in the short-term, the impact of this on pensions and retirement income is going to be huge.”

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