Brexit drives up equity yields

UK share prices fell during May as Prime Minister Theresa May announced that she would be standing down. The announcement – which triggered a Conservative Party leadership contest – stoked uncertainty over the eventual outcome of Brexit and undermined sentiment towards UK equities. 

  • Yields on equity indices rose as prices fell
  • The IA urged companies to make their dividend payment policies more transparent
  • M&S revealed a dividend cut and a one-for-five rights issue

To view the series of market updates through May, click here


UK share prices fell during May as Prime Minister Theresa May announced that she would be standing down. The announcement – which triggered a Conservative Party leadership contest – stoked uncertainty over the eventual outcome of Brexit and undermined sentiment towards UK equities. 

“Global dividends posted headline growth of 7.8% during the first three months of 2019”

The FTSE 100 Index dropped by 3.5% during May, while the FTSE 250 Index – representing medium-sized UK companies, which tend to have more exposure to the domestic economy than their blue-chip counterparts – fell by 4.3%. Meanwhile, the yield on the FTSE 100 Index rose during May from 4.36% to 4.56%, while the FTSE 250 Index’s yield climbed from 3.15% to 3.25%. In comparison, the benchmark UK government bond yield fell from 1.12% to 0.87%,

Over the first five months of the year, the best-performing FTSE industry sectors have been leisure goods, technology hardware & equipment, and food & drug retailers. At the other end of the performance spectrum, the worst performers include automobiles & parts, fixed-line telecommunications, and oil equipment & services. 

Vodafone cut its dividend payment for the first time from 15.07 eurocents per share to nine eurocents per share. CEO Nick Read said that the decision to “rebase” the dividend was taken to allow the company to reduce debt and facilitate future growth. Elsewhere, M&S unveiled a dividend cut of 25.7% in a bid to “restore the … dividend payment to a sustainable level” alongside a one-for-five rights issue to raise around £600 million to finance its joint venture with Ocado.

During May, the Investment Association (IA) called for companies to increase the transparency of their dividend payment policy, urging firms to publish a “distribution policy” that sets out their approach to paying dividends to shareholders. The IA found that 22% of dividend-paying FTSE-listed companies do not hold annual votes on the payment of the final dividend, and 12 of the top-20 FTSE companies had paid dividends without a shareholder vote. 

Global dividends posted headline growth of 7.8% during the first three months of 2019 to reach a first-quarter record of US$263.3 billion, according to Janus Henderson’s Global Dividend Index. Underlying growth was 7.5% as the effects of special dividend payments were offset by currency movements. In the UK, a substantial special dividend from miner BHP drove headline dividend growth to 10.5%; underlying growth, however, was below the global average at 4.4%.


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