UK share prices were dragged down during September by fears that the economic recovery could be held back by a “second wave” of coronavirus infections. The FTSE 100 Index fell by 1.6% during September, while the FTSE 250 Index declined by 2.7%.
- UK share prices fell in September
- Several UK companies reinstated dividend payouts
- UK equity income funds remained out of favour with retail investors
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UK share prices were dragged down during September by fears that the economic recovery could be held back by a “second wave” of coronavirus infections. The FTSE 100 Index fell by 1.6% during September, while the FTSE 250 Index declined by 2.7%. The yield on the FTSE 100 Index edged up from 4.70% to 4.72% in September, while the FTSE 250 Index’s yield climbed from 3.66% to 3.76% over the month. In comparison, the yield on the benchmark UK gilt fell from 0.31% to 0.23% in September.
“2020 will be the worst year for global dividends since the financial crisis”
In the FTSE’s quarterly reshuffle of its UK equity indices, discount retailer B&M was promoted to the FTSE 100 Index, replacing broadcaster ITV, which was demoted to the FTSE 250 Index. A further nine companies were promoted to the FTSE 250 Index, including Premier Foods, Diversified Gas & Oil, translation services company SDL, and pharmaceuticals firm Vectura.
During September, supermarket operator Morrisons reported a 25.3% drop in half-year profits, citing the impact of higher costs incurred by the Covid-19 pandemic. Nevertheless, the supermarket reported an 8.8% increase in sales and raised its dividend, although it deferred a decision on its special dividend. Meanwhile, despite reporting a sharp drop in profits, news publisher Reach revealed a bonus dividend payout and confirmed that it intends to resume its programme of ordinary dividend payments when market conditions improve. Elsewhere, plumbing and heating supplier Ferguson announced the reinstatement of its dividend payout, citing “better than expected” trading and drinks manufacturer Fever-Tree raised its interim dividend payout.
Although equity funds in general enjoyed net retail inflows of £340 million during August, according to the Investment Association (IA), UK equity funds suffered outflows of £748 million. The UK Equity Income sector experienced outflows of almost £275 million and the Global Equity Income sector experienced outflows of almost £275 million and £62 million, respectively.
2020 will be the worst year for global dividends since the financial crisis, according to Janus Henderson’s Global Dividend Index, which expects headline global dividends to fall by 17% in a best-case scenario, representing a total payout of US$1.18 trillion. The worst-case scenario would see a headline drop of 23% to US$1.10 trillion. North America is expected to present the greatest area of uncertainty in Q4, when payouts for the next four quarters are announced.
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