UK banks scrap dividends

 In Articles

By: Yaron S. Goldblum

Following in the footsteps of many European banks, the major UK banks also decided yesterday to cancel the payment of the final dividend 2019. These include Barclays, HSBC, Lloyds Banking Group and Santander’s UK branch. They are doing this partly at the request of the UK Prudential Regulatory Authority. In any case, it will save GBP 8 billion in pay-outs that now remain on the balance sheets, which will enable them to strengthen the buffers for more difficult times. The second ‘prudent’ request not to pay out a bonus to top management this year has not yet been responded to… The result is not difficult to guess, the prices of the shares in question are plummeting slightly harder today than the stock market as a whole.

Dividend investors are being hit on all sides in this respect. Receiving less dividend and as a result of this also falling prices harder. This is happening at a time when dividend investing has been on the rise in recent years due to low interest rates. Because with a ‘handsome’ dividend share, you could invest in an income-focused way. After all, it yielded much more than the savings account. Many people put a portion of their savings there or exchanged their low-yielding bonds for it. But now that a lot of companies are reducing or cancelling the dividend, it’s time to scrape it out for those investors.

Today, besides the corona-news and therefore various warnings, the stock exchanges are dominated by all kinds of purchasing managers’ indices that are released worldwide. In China we see a slight recovery, but in the rest of the world it is less cheerful. And the latter could threaten a V-shaped recovery in China. Today, in any case, this is one of the reasons why prices are sinking. In the course of the morning the stock exchanges in Europe are about 2 to 3 percent in the red. It may sound crazy, but that’s already starting to look like something of peace and quiet because the average daily result of the S&P 500, for example, was no less than 4.8 percent in March.

The fact that China is recovering is not only demonstrated by the fact that the production centres are almost fully operational again. In the meantime, they are also supplying ventilation equipment to the rest of the world, albeit on a modest scale. Elon Musk, the founder of Tesla, already bought 1,255 respirators in China last week and then donated them to the United States; yesterday 800 respirators and 300,000 mouth masks were flown into Europe, donated by Jack Ma, the founder of Alibaba. Regardless of how Trump has done his best in recent years to make China a cup smaller, many people today will be glad that he did not succeed. It seems that China is emerging from this crisis as the best.

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