I've published this piece today on Sharechap.com

Two weeks ago I wrote about Buying in Market Meltdowns. One of the features of that piece was looking at the eye-watering dividends that were available in the FTSE100. By way of recap they were (with estimated dividend cover for 2020 in brackets):

  1. Imperial Brands (IMB) (Tobacco)- 15.78% (1.22)
  2. Shell (RDSB) (Oil)- 13.49% (1.26)
  3. BP (BP.) (Oil) - 12.10% (1.22)
  4. BT (BT.) (Telecoms)- 10.22% (1.55)
  5. WPP (Advertising)- 10.78% (1.45)
  6. HSBC (HSBA) (Banking)- 9.14% (1.28)

(Source- Stockopedia- 13 March 2020).

Out of interest they now are as follows:

  1. Imperial Brands (IMB) (Tobacco)- 15.70% (1.25)
  2. Shell (RDSB) (Oil)- 12.1% (0.78)
  3. BP (BP.) (Oil) - 10.6% (0.68)
  4. BT (BT.) (Telecoms)- 12.7% (1.55)
  5. WPP (Advertising)- 11.6% (1.40)
  6. HSBC (HSBA) (Banking)- 8.67% (1.25)

(Source- Stockopedia- 28 March 2020).

Of course there is an inherent problem in relying on these figures in that most companies have now ceased providing forward guidance to the Market - at least until the extent of the CV19 effect is known. There are however a couple of interesting points to observe:

1. The two oil companies BP and RDSB (both of which saw big one day surges in share price this week) have both fallen into the “red zone” for dividend coverage. Put simply they will have to use their cash reserves or borrow money to maintain their present dividend. Royal Dutch Shell is proud of never having had to cuts its dividend for 75 years. I imagine that it is now coming under pressure, like never before.

2. BT has seen its share prices increase since 13th March, albeit dividends guidance seems to have improved with coverage maintained. We won’t know for sure until they next report to the Market on 7th May 2020, however with the current reliance of the UK’s housebound population on their core services they appear to moving into becoming a more defensive play.

What is striking about these six is that none of them have yet announced a dividend cut or suspension to the Market. That is quite unlike a lot of the rest of the Market.

I have spent some time today studying the list of dividend cuts. In short it adds out to an enormous amount of money- £4.3 billion of dividends went this week by my calculation. I thought it would be helpful to add a few of my own thoughts on these:

1. The vast majority are in cyclical as opposed to defensive…

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