Vodafone At Risk of Dividend Cuts
Vodafone, a company which has traditionally been a safe-haven for investors, is now at risk of having to cut its dividends. According to an analysis published by Canaccord Genuity, the dividend payout ratio for the FTSE 100 as a whole is now above 70 percent.
There are companies in several different sectors that are facing pressure to keep their dividends high, in the face of falling revenues. Canaccord says that this could be problematic for those companies if any of them were to face cashflow problems.
The companies that are considered most at risk include Rio Tinto, Tate & Lyl, Vodafone, Weir, Inmarset, Diageo, Vodafon, IT and Stanley Gibbons, as well as several others - with food producers, retailers, telecoms companies, miners and other sectors all affected.
Vodafone and Diageo are two companies that investors rely on for dividend payment, and Simon McGarry, a senior equity analyst that worked on the study, notes that it may surprise many investors exactly how uncovered the dividends for those companies are.
While the companies listed above are some that have particularly uncovered dividends, it’s important to note that they’re not the only companies at risk of cuts. The study highlighted companies which had negative earnings growth for both this year and last year - there will be other companies experiencing turbulent times which may opt to make cuts to their dividends early on, in order to protect their balances. This puts investors that rely on steadily increasing dividend payments in a difficult position.