Investments for income are hit as firms cut share dividends

Share dividends have always been a mainstay for income generating investments and the impact of coronavirus on company cash flows has seen dividends slashed.

For more than a decade the strategy has been to invest in stock markets as companies rewarded shareholders with dividends. But the coronavirus lockdown has seen revenues and profits wiped out in just a few weeks and now the tide is turning for investors for income as companies act to protect any cash they might have in the bank.

More than 350 UK companies have announced dividend cuts or suspended payments since May but worryingly 41 are the FTSE 100 heavyweights and 98 from the FTSE 250. And if you thought one sector might be more secure than another, forget it, big names including BT, Royal Dutch Shell, HSBC, Lloyds, Barclays, RBS and Standard Chartered as well as airlines, travel firms and housebuilders.

While many big investors have publicly said they support companies reducing dividends, the large scale cuts have hit investment returns and worried many portfolio managers especially as banks were ordered by regulators to cancel dividends for the year and many insurance companies followed suit.

So where are investors moving their money? Moving away from the traditional portfolio of shares the soverign and corporate bond market has seen a massive surge in bond issuances, these fixed rate income bonds might just be the anser to the lack of dividends, and may just be the answer to income generating investments in the foreseable future.