“Even though the insurer’s decision to cancel its proposed 20.7p-per-share special dividend will be a blow, Admiral’s retention of its £166 million final, ordinary dividend for 2019 brings some comfort to income-seekers, especially as this means Monday is the seventh trading day in a row where the value of dividends confirmed matches or exceeds that of payments deferred, suspended or cancelled,” says Russ Mould, AJ Bell Investment Director.
Source: Company accounts
“April overall has been much kinder to income-seekers than last month. In March, dividends worth £15.4 billion were cut, deferred, suspended or cancelled altogether for either 2019 or 2020 while firms committed to paying just £1 billion. A brutal end to the month, when over £10 billion of payments were passed by the Big Five FTSE 100 banks, WPP and Glencore among others, made March a miserable one.
“But dividend-keepers have had a bigger say in April. Firms have committed to retaining £5.6 billion in dividend payments for either their 2019 or 2020 fiscal years, almost on a pace with the £5.8 billion that have been cut, deferred, suspended or passed.
“This is not to say that income-seekers can breathe easily just yet. Nearly a fifth of the FTSE 100 is due to provide some sort of trading update this week alone and the five single biggest payers for 2019 in cash terms are among them. Even more importantly all of that quintet (usually) pays dividends on a quarterly basis so some £8.4 billion in dividend payments are up for grabs this week alone.
|
|
2019 |
2019 |
2019 |
Last quarterly payment |
|
|
|
Dividend (£ million) |
% of FTSE total payment |
Dividend yield (%) |
pence |
(£ million) |
|
Royal Dutch Shell |
11,612 |
15.4% |
10.6% |
$0.47 |
3,001 |
|
BP |
6,491 |
8.6% |
10.1% |
$0.1050 |
1,716 |
|
BAT |
4,826 |
6.4% |
7.2% |
48.8p |
1,119 |
|
HSBC |
4,755 |
6.3% |
5.8% |
$0.10 |
1,642 |
|
GlaxoSmithKline |
3,991 |
5.3% |
4.8% |
19.0p |
953 |
|
TOTAL |
31,676 |
42% |
|
|
8,431 |
“HSBC has already declared that it will not pay a dividend of any kind in 2020. This means is $0.10 first-quarter payment will be passed although it could leave the bank with enough wiggle room to declare one alongside its Q4 results in calendar 2021 and then pay one after its spring 2021 AGM. This means HSBC could still make some form of payment for the 2020 fiscal year, if the bank and regulators feel that circumstances permit.
“That leaves the other four: Shell, BP, BAT and GlaxoSmithKline.
“Investors still have to worry about the long-term regulatory and public pushback against smoking tobacco (and even the available alternatives such as vaping and e-cigarettes) but in the short term BAT may just be one of those ‘sin’ stocks that keeps on paying.
“GlaxoSmithKline’s boss Emma Walmsley has committed to an unchanged 80p-per-share full-year pay-out, albeit with research and development and drug pipeline delivery as the ultimate priority. Free cash flow cover for the dividend in 2019 reached its highest level since 2015, at 1.46 times, so that helps to underpin the payment where the quarterly distributions were 19p in Q1 to Q3 and 23p in Q4.
|
GlaxoSmithKline |
|||||
|
£ million |
2015 |
2016 |
2017 |
2018 |
2019 |
|
Sales |
23,923 |
27,889 |
30,186 |
30,821 |
33,706 |
|
Operating profit |
10,322 |
2,598 |
4,087 |
5,483 |
6,961 |
|
Depreciation & amortisation |
1,861 |
1,862 |
2,981 |
1,763 |
2,996 |
|
Net working capital |
(27) |
(22) |
(737) |
(247) |
531 |
|
Capital expenditure |
(1,901) |
(2,352) |
(2,202) |
(1,796) |
(2,163) |
|
Operating Free Cash Flow |
10,255 |
2,086 |
4,129 |
5,203 |
8,325 |
|
|
|
|
|
|
|
|
Tax |
(2,062) |
(1,609) |
(1,340) |
(1,326) |
(1,512) |
|
Interest |
(653) |
(664) |
(669) |
(717) |
(814) |
|
Pension contributiion |
0 |
0 |
0 |
0 |
0 |
|
Lease payments |
(25) |
(18) |
(23) |
(28) |
(214) |
|
Free cash flow |
7,515 |
(205) |
2,097 |
3,132 |
5,785 |
|
|
|
|
|
|
|
|
Dividend |
3,844 |
3,845 |
3,846 |
3,847 |
3,953 |
|
Free cash flow dividend cover |
1.95x |
(0.05x) |
0.55x |
0.81x |
1.46x |
|
Remaining free cash flow after dividend |
3,671 |
(4,050) |
(1,749) |
(715) |
1,832 |
Source: Company accounts
“That leaves the oils, where a first-quarter dividend cut from Norway’s Equinor last week will have sent a few shivers down the spines of shareholders in BP and Shell.
“Both British oil majors appear committed to their annual dividends, where Shell’s last cut is said to date back to the 1940s and BP’s came ten years ago in the wake of the Deepwater Horizon oil rig disaster in the Gulf of Mexico.
“In their March trading updates both companies emphasised cost reductions, decreases in capital investment and asset sales, in addition to their ability to either tap existing, undrawn debt facilities or raise new ones. Neither firm expressly mentioned their dividend but the underlying message seemed to be one designed to reassure on the issues of liquidity and financial strength, as if to suggest the shareholder distributions are safe.
“Admittedly, oil prices have gone lower still since those updates but both BP and Shell may be inclined to look through April’s price collapse in the view it is the result of a highly unusual combination of events, with the effects of COVID-19 on global demand on one hand and the workings of the oil futures and derivatives markets on the other. Doubtless management will be hoping both phenomena are temporary for all sorts of reasons, above and beyond the dividend in the case of the viral outbreak.”
