Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.
Today’s investors have their eye firmly fixed on the longer-term and are more concerned about wider economic recovery than their own financial situation right now.
According to the latest Fidelity Investor Survey, when it comes to uncertainty created by the pandemic, more than half of investors are willing to sacrifice short-term income and gains in favour of long-term economic recovery. Some 78%, of the 1,000 investors surveyed in May, said their worries about the wider economy far outweighed any concerns about their own financial situation.
And they said they were prepared to sacrifice dividend payments now if it ensured the longer-term survival of the companies they invest in.
That will be reassuring news for the increasing number of companies that are taking the decision to cancel or postpone their dividend pay outs, in a bid to preserve capital and ensure they have the ability to weather the coronavirus crisis.
Across all sectors, long-term dividend payers are telling investors that no cash will be coming their way in the short-term. Imperial Brands has cut its dividend for the first time, in a bid to reduce debt. While Royal Dutch Shell, the biggest dividend payer in the FTSE 100 in 2019 cut its payout for the first time since the second world war.
Marks & Spencer, BT, Stagecoach and Centrica have all done the same, while the likes of Sainsbury’s, Morrisons and Glencore have deferred the decisions on their payouts to investors until later in the year.
Fidelity’s Investor Survey, which captures UK investor sentiment since the outbreak of COVID-19, reveals the considerable concern many investors feel towards the long-term economic repercussions of the pandemic. And it is clear that these worries far outweigh the 54% surveyed who said they are primarily worried about the direct impact on their own financial position.
The survey also shows that investors remain supportive of the extensive measures the Government and companies may need to consider in order to secure the UK’s economic future - even sacrificing their own potential income and returns. With a growing number of companies deciding to suspend or cancel dividend pay-outs to shareholders in favour of strengthening their capital position, Fidelity’s research finds that just over half (51%) of investors would support foregoing this income stream to help the UK economy recover.
With the Government’s package of relief measures requiring significant funding, investors are also supportive of increased public borrowing (61%), as well as tax cuts on businesses to help them through the crisis (58%).
Many investors will be hard hit by companies cancelling, suspending or reducing dividends they have come to rely on. In an era of lower-for-longer interest rates the hunt has increasingly been for income from equities. And the companies did not disappoint. Until now. However, what the Fidelity survey shows is that investors are prepared for short-term cuts in order to maintain long-term survival of these companies.
For anyone reliant on an income, these are decidedly tough times. Picking and choosing which companies are likely to cut their dividend payouts is a difficult task. Maintaining a diversified portfolio is the best way of trying to ensure some source of income.
Our Select 50 range of recommended funds offers a range of equity income funds, whose fund managers focus on investing in companies that will provide dividend payments. It may also be an idea to broaden your income hunt, by looking overseas as well. As well as those with a focus on the UK, like the Franklin UK Equity Income Fund and JOHCM UK Equity Income Fund, the Select 50 list of preferred funds also includes the JPM US Equity Income Fund which has a focus on the US.
Join Ed Monk for this week’s Money Talk Radio Podcast for more on the Fidelity Investors Survey.
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Overseas investments will be affected by movements in currency exchange rates. Select 50 is not a personal recommendation to buy or sell a fund. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.