“Liverpudlian band Echo And The Bunnymen sang ‘Spare us The Cutter’ back in the early 1980s and nine companies have heeded their call and opted to maintain planned dividend payments this week, including three FTSE 100 firms,” says Russ Mould, AJ Bell Investment Director.
“SSE, Coca-Cola Hellenic Bottling and Berkeley have all stuck to their guns to help put £1 billion in the kitty for hard-pressed investors, who have had to sit and suffer as over 100 firms have postponed or cancelled some £4.2 billion of dividend payments in March alone.
|
Announcement |
Company |
Dividend payment held (£ million) |
|
27-Mar-20 |
SSE |
582.0 |
|
27-Mar-20 |
CCH |
208.7 |
|
27-Mar-20 |
Berkeley Group |
124.9 |
|
25-Mar-20 |
Vivo Energy |
29.7 |
|
26-Mar-20 |
Reach |
12.1 |
|
27-Mar-20 |
GCP Student Living |
7.2 |
|
27-Mar-20 |
Supermarket Income REIT |
3.5 |
|
27-Mar-20 |
Mattioli Woods |
2.0 |
|
26-Mar-20 |
Tandem |
0.3 |
|
|
TOTAL |
970.4 |
Source: Company announcements
“The businesses involved are all very different, from a pan-European fizzy drink bottler to a housebuilder, from a utility to a media group and from a chain of African petrol stations to toy-maker Tandem, which not only raised its dividend but declared a special dividend of 2p-per-share for good measure, thanks to strong sales of Batman, Paw Patrol and Peppa Pig ranges, as well as licenced Disney products.
“But there are some similarities and this may give income-seekers some hope as they pick through the market wreckage and look for dividend streams that can help see them through these turbulent times.
“Berkeley, Tandem and Reach have net cash balance sheets, for example (though the toymaker and publisher also carry pension deficits).
“CCH’s €1.7 billion debt pile is not substantial relative to its €2.7 billion equity base and interest cover was more than 10 times while dividend cover exceeded two times.
“As a utility, SSE enjoys relatively predictable demand – although the company did take pains to stress that it was constantly reviewing the event of the possible economic downturn upon even its business, cash flows and dividend plans – while Supermarket Income REIT has one of the very few industries that is booming now as its key customer base.
“As such, investors can take some pointers, even if a long lockdown period and any deep recession could test the resolve of even the most determined payer of dividends:
• Relatively predictable and stable revenues streams or businesses that supply basic needs for those who are stuck as home (food, utilities) or have customers who provide those goods and services
• Net cash or robust balance sheets with plenty of cash at hand
• Good levels of interest cover and earnings cover
• Where there is debt on the balance sheet, check out the covenants and their triggers (if there are any), when it matures (as that could be several years away) and how much of the available facilities have been withdrawn, as there could still more headroom here, meaning the firm can tap existing loans and not have to go to the bank for fresh borrowings.
