Investors hit by BP dividend fallout

22 June 2010 | By Stefanie Eschenbacher

Adjusted only for the loss of BP’s dividend payments, total dividend payments for this year will fall to £53.8 billion.

The oil giant will lose its pole position on the list of Britain’s biggest dividend payers after the Gulf of Mexico spill forced it to set aside $20 billion (£14 billion) as compensation.

“2009 was already a bad year for dividends and we expected a recovery in 2010,” says Mark Baker, the head of research at Capita Registrars. “Now this year is going to be even worse.”

Earlier this year, it seemed the equity income sector had started to recover. British companies paid out £13.6 billion in dividends in the first quarter. Although the figure was 2.5% less than in the same period last year, it was the smallest drop since the recession began. (article continues below)

Income investors have had a tough time over the past year. With interest rates at all-time lows, cash has failed to provide sufficient income and dividends have been cut.

Capita Registrars and Standard & Poor’s (S&P) Fund Services previously warned income funds are forced to rely on a handful of dividend payers. Now BP has suspended its dividend, five big companies will just dominate dividend payouts - Shell, HSBC, Vodafone, Glaxo-SmithKline and AstraZeneca