Three cheers for the pandemic dividend cutters

Financial regulators in the UK and Europe are forcing or nudging dividend cuts.

But there are good reasons to suspend dividends voluntarily. It's wise to conserve cash when revenue is under pressure and the equity market might be hard to rely on as a source of funds. A company risks losing the support of society if it pays out cash to shareholders while forcing pain on staff, or while benefiting from taxpayer-funded crisis measures.

The trickier issue is individual shareholders who have chosen to use stock-based portfolios for income even though dividends are discretionary. The marketing hype of the finance industry may be a culprit here, having persuaded investors that stocks are like"magic bonds", as pensions expert John Ralfe has argued.

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BusinessTimes /  🏆 15. in SG

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