More than 70 FTSE 350 firms have 0% annual dividend yield – and payouts won’t rebound to pre-pandemic levels next year
- GraniteShares thinks dividends will still below their pre-pandemic levels in 2022
- In 2020, over half of FTSE 100 firms cut, suspended or cancelled their dividends
- Recent AJ Bell analysis estimates that dividends will only rise modestly next year
Dozens of FTSE 350 companies have an annual dividend yield of zero per cent whilst 30 have yields below 1 per cent, new analysis has found.
Fund manager GraniteShares, which specialises in exchange-traded funds, said that 11 blue-chip FTSE 100 firms and 61 mid-cap FTSE 250 firms have no dividend yield whatsoever.
It has also predicted that dividend payouts will still be lower than their pre-pandemic levels next year and only gradually recover in 2023.
Zero per cent: GraniteShares, which specialises in exchange-traded funds, said that 11 blue-chip FTSE 100 firms and 61 mid-cap FTSE 250 firms have no dividend yield whatsoever
But as the UK has come out of the worst of the global health crisis, it noted that far fewer London-listed firms had reduced their dividend payments to shareholders in some form in 2021.
In 2020, just over half of FTSE 100 businesses and more than 100 on the FTSE 250 either cut, suspended or cancelled their dividends, as did many more listed on junior shares indices.
Some of the biggest names to cut dividends included Antofagasta, Standard Chartered and Shell, the latter of which cut its dividend for the first time in 75 years as oil prices collapsed into negative territory.
This subsequently caused dividends to slide to their lowest levels since 2011.
But, this year, one firm on the FTSE100, six on the FTSE 250, and five on the Small-Cap Index have reduced their dividends.
GraniteShares believes the pressure on shareholder returns has boosted demand for UK retail investors using short trading and leverage strategies, such as its triple-leveraged long- and short-single stock exchange-traded products (ETPs).
Its most popular stock with both long and short traders was Tesla, the share price of which took off considerably last year before declining in the early months of 2021, flatlining for a few months and then shooting up in value again.
Weak rebound: The recovery in dividends this year is very welcome, but the expectation is that investors will have to wait for a full recovery,’ said GraniteShares founder Will Rhind
Its founder and chief executive Will Rhind said: ‘The recovery in dividends this year is very welcome, but the expectation is that investors will have to wait for a full recovery with payouts still lower than they were in 2019.
‘As investors look to replace these lost returns, many sophisticated ones have turned to using leverage and short investment strategies, which has fuelled strong growth in our single stock 3x long and 3x short ETPs.’
GraniteShares’ analysis come a few days after AJ Bell released new forecasts estimating total dividend payouts to substantially slow in 2022, growing by just 2 per cent to £83.7billion compared to an annual jump of £20billion this year.
However, it suggested this could be a sign of enhanced ‘dividend cover’ – the ratio of a firm’s net income divided by the dividend paid to shareholders. This can help firms strengthen their balance sheet and ensure more stable payouts to investors.
The Manchester-based trading platform expects Glencore to disburse the largest increase in dividends of £1.48billion, with Shell and HSBC trailing far behind in second and third place with £575million and £453million rises, respectively.
It also expects mining giant Rio Tinto to be the highest-paying stock next year, followed by Shell and British American Tobacco, something it admits ‘may have ESG-oriented investors gnashing their teeth.’