Dividends and the cut reaction

With quantative easing measures contributing to strong market rallies, it could be that the worst of the cuts in dividends is over

Despite what we read in the papers, I believe the worst of the dividend cuts is already over. Faced with a combination of a nasty squeeze on working capital and orders ‘falling off a cliff’, companies first cut costs, then jobs and, finally, dividends. In the first quarter of this year, many companies announced their intention to reduce or miss dividend payments. Payout dates typically came some three months later, while equity income funds themselves report according to their own regulatory timetable. Unlike quoted companies, income funds do not have the luxury of building dividend cove...