Disappearing dividends
There’s a growing trend of SA companies choosing not to pay dividends to shareholders right now, almost similar to what they did during the pandemic
Yesterday Multi-choice & Telkom were the bearers of bad news on dividends.
Today Spar…
…Because of XYZ, it’s not paying one
— Fifi Peters (@FifiPeters) June 14, 2023
Disappearing dividends
Just this week Spar (JSE code: SPP), MultiChoice (JSE code: MCG) and Telkom (JSE code:TKG) have all cut dividend to zero.
We had big dividend payer Coronation (JSE code: CML) drop theirs to provision for the SARS fine and historically good dividend payer Pick n Pay (JSE code: PIK) reduce theirs.
This shows the pain that companies are experiencing, not all, but certainly some, It perhaps also shows quality, for example Shoprite* (JSE code: SHP) increased their dividend.
The problem is we love dividends for cash flow and they tend to grow ahead of inflation, sometimes well ahead of inflation. They’re also taxed better than traditional income from bonds or cash (albeit not as low as CGT). But the downside is that any dividend can disappear at any time.
For investors such as myself, reduced dividend is not a big problem. I like the cash flow but don’t need the income for expenses. For those living on dividends the pain is real. If the income is required you need a good amount of bond and cash investments and REITs that aside from the pandemic pay consistently, albeit REITs reduced over the last 5 or 6 years.
Another option is something like dividend aristocrats (we have a local DIVTRX and offshore GLODIV ETF for these). Here we have companies with decade long track record of paying dividends, but remember Steinhoff (JSE code: SNH) was in the local dividend aristocrat ETF, so even this is not guaranteed. But a basket or ETF works well.
Simon Shares
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Simon Brown
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JSE – The JSE is a registered trademark of the JSE Limited.
JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.