Hi all. I am assessing some potential purchases. some of which include UK banks and some others that have suspended dividends this year. So what amount do you think is likely (or has been in past suspensions) that they come back at?
Do you think they will come back at similar % as before just lower payout as share price might be lower, or do you think they will come back at same payout amount so if price is lower % yield will actually be higher.
I know there is no hard and fast answer but looking to get some more value dividend stocks that have suspended currently.
Fair question, two fold really one is that often they have been dumped by dividend investors so have some upside potential for growth, also with banks and housing they will be reinstating them and if you buy at reduced rates then the yield on cost can be very tasty.
Yeah I am basically estimating that at the previous levels of dividend for housing, banks etc the yield would be very good on current prices, also even factoring like 50% less they still producing solid dividend return as well as some growth potential. Its obviously just a fraction of portfolio but worth a punt, and some have already produced good growth.
Whilst it would be great if they did resume dividends at previous levels and I’m hopeful they will, they didn’t really recover from the 2008 GFC. Lloyds dividends:
Yes the 2008 GFC was finance based, this one was external factor so banks will come back for sure.
To use Lloyds as you say as an example, if they reinstated 3p, thats a 7.9% yeild on prices at time of typing, even 2p is 5.2%, 1p is 2.6%.
I looked more at HSBC for UK banks as yes they have chequered past recently but if Brexit goes badly I think that will do better than other banks due to their international aspects. For reference if they do dividend at 2019 levels, HSBC would be a yield of 9.7% yield on today. So as I dont hunt for such high yields as often not sustainable, I see it that either HSBC share price will rise on news of dividend (so we benefit from growth but yield is less for new purchasers) OR they cut the dividend, but even a 75% cut could mean a 2.4% yield.
Your reasoning is why I’ve invested about 1% of my portfolio into Lloyds and Barclays so not massive amount but wanted some banking exposure.
I’m now +30% and +35% respectively so I would caution that they have already risen a fair bit on the vaccine news, Certainly still room to run but could be a few speed bumps along the way as a low interest rate environment and potential for economic pain as stimulus/furlough winds down in 2021 could still hurt the banks.
