Government may ban dividends payouts for companies that take out taxpayer-backed loans in the coronavirus crisis
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The Government is considering banning dividends at companies which take out taxpayer-backed loans in the coronavirus crisis.
Firms which borrow up to £200m under the Coronavirus Large Business Interruption Loan Scheme (CLBILS) could be prevented from doling out payouts to investors, Sky News reported.
Ministers are also considering limiting executive pay and bonuses at these companies.
Burberry next?: The trench coat titan is also preparing to become the latest to slash its dividend payout
The measures would reflect the Cabinet’s desire to prevent taxpayer-backed survival loans being used to line the pockets of fat-cat bosses.
But savers are already set to lose out on billions of pounds as global dividends plunge by up to 35 per cent.
With Burberry preparing to become the latest to slash its payout this week, total dividends from companies around the world will tumble by as much as £414 billion, according to Janus Henderson’s Global Dividend Index.
In this worst-case scenario, global shareholders will spread a relatively meagre £771 billion between them, down from £1.18 trillion in 2019. The UK and Europe are likely to suffer most from dividend cuts.
All of the UK’s major banks, several insurers, and FTSE stalwarts whose shares are held by scores of savers such as BT, Shell and British Gas owner Centrica have already cut payouts.
In total, more than 320 London-listed companies have axed dividends worth £30 billion, according to analysis from AJ Bell.
Ben Lofthouse, of the Global Equity Income fund at Janus Henderson, said: ‘Dividend suspensions are inevitable. This downturn looks very steep, but support from governments and central banks has been unprecedented, which we hope will make any recovery swift.’
Under Janus Henderson’s best-case scenario, which relies on just a few more companies announcing dividend reductions, payouts will fall 15 per cent to £1 trillion. But this seems unlikely.
Analysts predict that trench coat titan Burberry, which is listed in London but makes much of its money in Asia, will shave down its full-year dividend from 42.5p to 33.8p on Friday.
That would take the total payout down from £170m last year to £137m, ending a decade-long run of growth.
Its sales dropped 30 per cent in the first three months of 2020. British investors are likely to be hard hit since a large chunk of the UK’s FTSE All Share index is made up of companies in the financial and oil and gas sectors.
The US, on the other hand, is home to a high proportion of technology companies which have been relatively unaffected by the crisis, asset manager Janus Henderson pointed out.
Companies in China and the rest of Asia have set their payouts based on 2019 profits, so will be more affected in 2021.
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