Standard Life Aberdeen: Dividend Cut - Get on with it!

I will not drone on about my last article on BP and Standard Life Aberdeen cutting their dividends in half from the 15th of July. BP did indeed halve its dividend this week (some thought they might follow Shell and cut by 2/3) but they also went on to say that it will ‘remain fixed at this level’ (5.25 cents each quarter). If you look at the US dollar dividend history of BP, which is the currency in which they report, then a fixed dividend will be familiar to you for fifteen quarters from October 2014 to May 2018.

Standard Life Aberdeen is a less clear cut situation on timing. They report their H1 numbers tomorrow (7th August). The dividend pay-out has been unsustainable with past earnings only being around the same level as dividends. Last year’s interim dividend was 7.3p and we will probably only see about 6p of eps from them tomorrow.

Their dividend policy needs to be changed and while Stephen Bird arrived on the 1st of July he is only the CEO designate at this stage and it is not clear exactly when he will have the CEO role to himself other than “by the end of the third quarter”. The past split on dividends has been 1/3, 2/3 re the interim and the final. So if they pay out around the 11p in dividends they should prudently do in a full year, rather than hosing out around 22p that they have been, then it’s possible we could see 7.3p tomorrow and a final dividend of about 3.7p in March 2021 if they merely try and kick the can down the road for the moment.  With a historic dividend yield of over 8% it’s clear the market does not see the past dividends as sustainable so they should get on with a dividend cut sooner rather than later. A 4% yield would not be unattractive in the current market.