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As outlined by the latest Dividend Dashboard through AJ Bell (AJB), the FTSE 100’s forecast dividend pay-out has gotten from £91 billion the government financial aid January to £62 million this month, while earnings cover for dividends continues to be worryingly thin.

That reduction would signify a 17% fall from the pay-out in 2020 compared to the previous year after an 11% drop in 2019, leaving the sum of at its lowest levels since 2014.
CUTS, CANCELLATIONS & DEFERRALS

Every quarter, AJ Bell takes FTSE 100 company forecasts on the leading City analysts and aggregates them to produce the dividend outlook for every company.

Its latest Dividend Dashboard reveals the blue chip benchmark currently gives the 3. 6% dividend generate. That is after 48 on the market’s 100 largest providers by market value get cut, deferred or terminated a dividend payment in addition to 49 have maintained or perhaps increased one for both fiscal 2019 or fiscal 2020.

The research displays that insurance giant Aviva (AV. ), M&G (MNG), the asset manager demerged from Prudential (PRU) recently, and oil major BP (BP. ) are the three highest yielders in the index - all paying in excess of 10% - although your record of companies featuring juicy 10%-plus yields within actually making those obligations is poor.
RECOVERY WITH 2021?

Russ Mould, purchase director at AJ Bell, commented: ‘The FTSE 100 is currently expected to yield SEVERAL. 6% for 2020, down from your 4. 7% the index has been expected to yield in the beginning of the year. ’

He explains that dividend forecasts for that year have slumped by way of third thanks to the particular COVID-19 virus outbreak and dividend payments can be expected to fall for two consecutive years before starting to forge a healing in 2021.

As stuff currently stand, some 46 FTSE firms are expected to increase their dividend throughout 2020, with just 40 anticipated to cut all of them. However, the cuts are often much deeper and come from firms whose contribution on the overall pot is a great deal bigger.

In a whack to income investors, the aggregate dividend payment from the blue chip benchmark’s standing is forecast to stop by £12. 5 billion to be able to £62. 5 billion this holiday season with just five firms in charge of the bulk of in which cut.
COVER IS ‘STUBBORNLY THIN’

Of course, dividend cover will be lower than ideal during an economic downturn as earnings come within pressure, yet today’s research also reveals that the aggregate earnings cover ratio to the FTSE 100 is just simply 1. 4 times.

‘That equates to your 72% pay-out ratio as well as suggests that management teams in addition to analysts and shareholders will be pinning their hopes over a second-half pick-up in economic activity and so profits and cash movement, ’ said Mould.

‘More encouragingly, analysts appear to think that boardrooms will never look to splash the money too quickly if the nice times do start in order to roll, as earnings are forecast to grow faster than dividends with 2021. That would allow earnings cover to begin to move back into the 2-times threshold that presents a safety buffer in the event of the unexpected – maybe a pandemic, or even only a common-or-garden economic downturn. ’CONCENTRATION RISK

Concentration risk has dogged anyone who has sought income from england stock market for numerous years. Just ten stocks are forecast to repay dividends worth £34. JUST ONE billion, or 55% belonging to the forecast total for 2020.

BP’s status since the biggest single payer inside the FTSE 100, according to consensus forecasts, presents investors with a particular conundrum. Rival Royal Dutch Disguise (RDSB) has already reduce its dividend and BP possesses form here, having slashed its pay-out in 1992 then again after 2010’s Gulf associated with Mexico oil rig accident.

BP’s cash flow is under pressure due to falling oil and gasoline prices, new boss Bernard Looney's desire to reinvent the firm it is ready for some sort of low-carbon future, and net debt that's way higher than 10 years ago.

Mould says a reduce would ‘not be the most important surprise in the world’, despite Looney’s public recognition belonging to the importance of the dividend to shareholders.
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