What’s New With Dividends?

Understandably, 2020 wasn’t a good year for dividend payments. Due to the obvious disruption posed by Covid-19 and its subsequent fallout, many companies suspended dividend payments. However, this year is looking more positive, with more hope on the horizon for investors.

What happened last year?

In 2020, global interest rates hit rock bottom, staying around zero or even below zero, with an average global fall in dividends of 12.2%. This drop was true for the vast majority of the world’s economies, whereas in the United States, dividends actually rose slightly.

For the UK, dividends experienced a similar trend to the rest of the world. According to data released by Link Asset Services, the total value of UK dividends paid by companies here fell by 43.1%. One-off payments took an even greater hit over 2020.

Dividend drops were seen across over a third of UK companies who decided to cancel their dividends altogether, with around a quarter choosing to cut them. This drop is largely in part to the Bank of England’s order to UK banks, asking them to end dividend payments in order to preserve their capital. Many other companies saw much of their revenue halt in 2020, meaning they had to cut dividends out of necessity.

What’s in store for 2021?

After the events of 2020, things seem to be looking up for 2021. The Bank of England has allowed UK banks to resume dividend payments, and some companies that previously suspended them last year have decided to reinstate payments.

This hasn’t been the case for everyone, however. Industries such as hospitality, which continue to feel the impact of lockdown restrictions well into 2021, are still intent on conserving cash in order to stay on the safe side. Lockdown restrictions in the UK have recently come to an end, so things may change for these industries in the future as they benefit from the bounce back in economic activity during the second half of the year.

This positive outlook is also shared by economic experts. Link Asset Services have estimated that regular dividend payments could rise by 5.6% in 2021 as a best-case scenario, which after the events of 2020 is positive and reassuring.

As the economy comes back to life and industries start moving again, investors could potentially benefit from rising dividends. If this is the case, it’s important to speak to a personal financial adviser in order to find out the best options to go for.

KLO Financial Services

At KLO, we have a team of vastly experienced independent financial advisers based in Birmingham, Warwick and London. We can help point you in the right direction regarding dividends, and how you can best use the positive outlooks for the future to your advantage. If you’d like to find out more about how we can support you with personal financial management, talk to us today by calling 01926 492406 or email enquiries@klofinancialservices.com.