Large shareholders such as pension funds and asset managers are calling companies to talk to on Saturday The Financial Times (FD) to postpone or even completely suspend the dividend payment. The appeal is remarkable, because dividend payments are normally an important asset for shareholders. Due to the economic consequences of the corona virus, these are not normal times, big investors argue.
“For many of our members, the dividend is sacred, but these are unusual times now,” said Paul Koster, director of the Association of Stockholders (VEB) FD. The coronavirus outbreak is slowing economic activity and even threatening to overturn companies. The dividend payment costs a lot of money and could therefore weaken companies even worse.
“Not paying dividends contributes to the stability of companies, which is sometimes necessary in volatile times,” explains Eloy Lindeijer in the business newspaper. Lindeijer is responsible for the investments at pension investor PGGM and manages a portfolio of approximately 250 billion euros.
Foreign asset managers also do not see the dividend payment as something untouchable for a while. “When boards look at their dividend and share buyback policies, the key point is to ensure that the company’s long-term confidence is assured. This could also include temporarily suspending or modifying that policy,” said Sacha Sadan , responsible for the investments of British pension investor LGIM, against FD. LGIM has an investment portfolio of approximately 1,300 billion euros and owns over 1.5 percent of Shell.
Central banks are also calling for the cancellation of dividend payments
On Friday, the European Central Bank (ECB) already called on banks to cut dividend payments until autumn. This call was endorsed by De Nederlandsche Bank (DNB).
European banks could keep tens of billions of euros in cash by scrapping dividend payments, ECB Chairwoman Andrea Enria said in a blog post.
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