The Motley Fool

Dividend cuts: these 3 FTSE companies just cancelled their payouts

Image source: Getty Images

Dividends are a powerful force in investing, especially during bear markets.

Investing for dividends, however, is not as easy as it sounds. When economic conditions deteriorate, companies sometimes cut their dividends, leaving their investors with no income stream. With that in mind, here’s a look at three FTSE companies that have been forced to cut their payouts recently.  

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...


Only a few weeks ago, broadcaster ITV (LSE: ITV) said it would be paying a full-year dividend of 8p per share for 2019. And it was planning to pay another dividend of 8p per share for 2020.

Yesterday, however, the company said in order to conserve cash in the wake of the coronavirus disruption, it would no longer be paying its final 2019 dividend of 5.4p per share. And it withdrew its intention to pay that 8p full-year dividend for 2020. This dividend cut is disappointing for ITV shareholders, myself included, who held the stock for its big payout.

In hindsight though, there were a number of warning signs here. For starters, the company cut its dividend in the Financial Crisis. Secondly, dividend growth had dried up recently. No growth is often a precursor to a cut.

Overall, the main lesson here, in my view, is that cyclical shares aren’t ideal dividend stocks. Earnings fluctuations mean they can’t always afford to pay a dividend.

Marks & Spencer

Another FTSE company that has announced a dividend cut in the last week is Marks & Spencer (LSE: MKS). On Friday, it warned that it would be “severely impacted” by the coronavirus and that in the current circumstances, the board did not anticipate making a final dividend payment for this financial year. Analysts had been expecting a final dividend of 6.9p per share.

This is not the first time MKS has cut its dividend recently. In May, the group cut its final 2019 payout by 40%. And then in November, it cut its interim dividend by 40% too. These cuts came after the group held its dividend flat for two years.

A key takeaway here is that it pays to be careful with companies that have recently cut their dividends. If a company has cut the payout once, it may have no hesitation in doing so again.

InterContinental Hotels

Finally, InterContinental Hotels (LSE: IHG) has also been forced to cut its dividend. It said on Friday that, in an effort to protect the long-term health of the business, it was withdrawing the recommendation of a final dividend of 85.9¢ per share announced in mid-February. And it will defer consideration of further dividends until visibility has improved. Management added that the group is “conservatively leveraged”. But it said the dividend cut was necessary to ensure that it comes out of the coronavirus crisis as strong as it possibly can.

Of the three companies I’ve mentioned, this cut was the least predictable. Yes, the hotel industry is cyclical. But IHG has an asset-light business model (meaning more flexibility) and a strong balance sheet. It also has an excellent dividend growth track record and has had a high level of dividend coverage in recent years.

Ultimately, this cut really is due to the ‘black swan’ nature of the coronavirus. The lesson for dividend investors? Portfolio diversification is always crucial.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Edward Sheldon owns shares in ITV. The Motley Fool UK has recommended InterContinental Hotels Group and ITV. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.