Lloyds Banking Group (LSE: LLOY) has been furiously trying to curry favour with its investors ahead of today’s AGM, and the bank has laid out the latest leg of its charm offensive: it will begin paying quarterly dividends to investors from 2020.
On Wednesday the FTSE 100 firm declared plans to furnish its 2.4m shareholders with three interim dividends for the first three quarters of the year, payments which will equate to 20% of the previous year’s total ordinary dividend per share and will be shelled out in June, September and December.
A larger fourth-quarter payment will be distributed in May following approval at the company AGM, Lloyds said, as per current practice.
Under pressure
The bank championed its decision to begin paying out on a quarterly basis as it “will provide a more regular flow of dividend income to all shareholders whilst accelerating the receipt of payments.” At the moment Lloyds pays dividends twice a year.
But why is it doing this? Well, on the face of it at least, the bank appears to be scared of an investor rebellion at today’s AGM over the size of chief executive António Horta-Osório’s pay packet. For 2018 he made a whopping £6.27m thanks in large part to pension contributions of 46%, a figure which dwarfs the maximum contribution of 13% available to other Lloyds employees.
His decision to reduce his annual pension contribution rate to 33% in response to employee ire hasn’t exactly gone down well either and the huge gulf between him and his workforce still exists. Just yesterday MP and chair of the Commons Work and Pensions Committee Frank Field bemoaned the“boundless greed”on display.
Fellow MP and chair of the Business, Energy and Industrial Strategy Committee Rachel Reeves went one step further by suggesting that “investors at Lloyds and other companies should… vote against remuneration reports which include CEO pay packages vastly outstripping those of the wider workforce.”
A great income buy?
Regardless of the controversy over executive pay at the bank, though, today’s news will no doubt encourage even more income chasers to consider ploughing in.
Lloyds has been a popular share with dividend-focused investors since it resurrected shareholder payouts half a decade ago, reflecting the hard work it did to mend the balance sheet and thus introduce chunky hikes in the annual dividend. Indeed, on the back of this generous policy, for 2019 and 2020 the Black Horse Bank carries gigantic yields of 5.6% and 5.9% respectively.
That’s not to say, however, that I am tempted to invest in Lloyds today. And nor, I believe, should any share pickers that are particularly intolerant of high levels of risk be encouraged to part with their hard-earned cash, either.
Time and again I’ve warned of the dangers created by Brexit on the firm’s bottom line in the near term and beyond, the threat of a prolonged EU process and/or a disorderly ‘hard Brexit’ weighing particularly heavily on UK-focused shares such as this. Indeed, as most recent financials showed, the issue is already affecting the bank through a combination of stuttering revenues growth and rising bad loans.
I don’t care about the blue-chip’s plans to pay four dividends per year, or those big yields that it carries right now. Lloyds is an accident waiting to happen and there’s plenty of better big-dividend payers to buy today, in my opinion.
