DIY Investor Magazine
/
Jan 2017
24
WHERE WAS DIVIDEND INCOME
TO BE FOUND IN 2016?
Mark Riding of DividendMax looks back on a ‘fantastic’ year for
the dividend investor
2016 was a momentous year, which started very badly
with the FTSE 100 index dropping from 6242 at the start
of the year and falling to 5537 by February 11th as the
markets contemplated the uncertainty surrounding the
EU referendum vote. Markets then rose as it became
apparent from opinion polls that the Bremain vote was
ahead.
2016 was a momentous year, which started very badly
with the FTSE 100 index dropping from 6242 at the start
of the year and falling to 5537 by February 11th as the
markets contemplated the uncertainty surrounding the
EU referendum vote. Markets then rose as it became
apparent from opinion polls that the Bremain vote was
ahead.
The day came as a shock to many and the markets
plunged over 1000 points in pre market trading as the
result became crystal clear at about 4am. The pound
plunged and it began to dawn upon investors that the
FTSE 100 was stuffed full of multinational companies
who made most of their earnings overseas. In addition,
many of these companies declared their dividends
in dollars giving an immediate 20% windfall to their
shareholders’ dividends.
This realisation gained traction and by the end of the
year the FTSE 100 was trading at an all time high. In
addition to this the bank of England stood (and still
stands) ready to deliver massive QE if necessary
ensuring that bond rates and interest rates will remain at
historic low levels for many years to come.
All of this is fantastic for the dividend investor in a year
when many commentators were telling us that it would
be a disastrous year for dividends.
A look at the DividendMax database of over 600
companies (which covers over 99% of UK dividends by
value) tells you that this was not the case.
Out of 620 companies, 420 increased their dividend in
the 2016 fiscal year. A further 132 kept their dividend
at the previous years level. So 89% of companies
increased or maintained their dividend.
The numbers are in the table below
Increased Maintained Reduced Cut to zero Takeover Cut
420
132
50
8
10
We looked at the number of full dividend cuts and
thought 18 seemed modest, but closer inspection
revealed that of the 18, only 8 were real cuts, the most
serious being Anglo American. Most were in fact due to
takeover notably SABMiller, Rexam Friends life, Infinis
and Catlin.
So only just over 1% actually cut their dividend in a ‘bad
year for dividends’
8% reduced their dividend.
FANTASTIC FOR THE DIVIDEND INVESTOR IN A YEAR
WHEN MANY COMMENTATORS WERE TELLING US THAT
IT WOULD BE A DISASTROUS YEAR FOR DIVIDENDS’
89% OF COMPANIES INCREASED OR MAINTAINED
THEIR DIVIDEND
