19 April, 2021

Dividends looking more ‘sustainable’, for now

Figures reveal that a big growth in profits has strengthened the sustainability of dividends.

City of London, financial markets, ftse100, corporate governance

Photo: Shutterstock

Dividend cover, a measure of dividend sustainability, has reached a three-year high as profits among the UK's largest 350 companies rose much faster than dividend payouts. A survey revealed that while profits-after-tax rose by a hefty 157% to £172.7bn, dividends swelled by a more modest 10% to £93.6bn. Those numbers give a dividend cover ratio of 1.8, up from 0.8 a year ago. The figures are expected to reassure income investors. Dividend cover is the ratio of profit-after-tax to dividends paid to shareholders. Helal Miah, research investment analyst from the Share Centre, which produced the data along with Link Asset Services, said:

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AJ Bell, Ben Lofthouse, dividend cover, dividends, Helal Miah, Janus Henderson, Share Centre