When the COVID-19 crisis struck, for those significantly impacted, corporate survival was uppermost in the minds of these companies and their shareholders. Companies moved to increase liquidity and strengthen their balance sheets, while institutions promised not to take up management time and facilitated faster and cheaper equity capital raising by relaxing the pre-emption guidelines. 

Three months on, over £11bn of new equity for the FTSE 350 has been raised, most companies have survived and institutions are now looking further ahead. Next to come under the microscope will be the December year end companies as they report interim results. 

Institutions will be looking at the trading performance for the first half and in particular the second quarter, if it is disclosed, because this is the first period wholly affected by COVID-19. They will be looking at balance sheets and statements on liquidity. And they will also be looking at outlook statements and what is said about dividends. 

Dividends are an indicator of prospects as well as a payment to shareholders based on past performance. Many of the 2019 final dividends were passed or suspended in the drive to improve liquidity and institutions took a benign view. However, we suspect this brief honeymoon is coming to an end. Investors will expect clearer guidance on what Boards are planning and the logic behind these decisions.

In this paper we set out how dividends for the UK market have evolved over recent decades, the actions companies have taken with respect to dividends in response to COVID-19 and the current range of sell-side expectations for distributions in the short term.