2020 has turned out to be a beartrap for many dividend investors. UK shares of all shapes and sizes have slashed dividends as they hunker down for a painful economic downturn.
Itâs not just those with weak balance sheets that have cut, suspended, or axed their dividends. Even scores of financially-robust British blue-chips have revised their dividend plans due to the unprecedented challenges created by Covid-19.
A shocking half of all FTSE 100 companies have now withheld dividends following the coronavirus pandemic. And BP and BHP Groupâs decisions to cut payouts last month suggests the bloodbath has much further to run. Buyers of UK shares clearly need to do plenty of research when hunting for income-paying stocks.
AIM dividends forecast to fall
A fresh report from Link Group illustrates the huge pressure facing British companies at this time. It says that payouts from AIM-quoted stocks slumped by more than a third (33.6%) during the second quarter of 2020. Around 40% of these UK shares axed dividends completely while a tenth reduced them.
As Link Group comments: âThe second quarter usually marks a seasonal high point for dividends, so what happens in this period is very important for the whole year.â Itâs not surprising then that the organisation expects full-year dividends from AIM companies to tank in 2020. It reckons total payouts will fall between 34% and 48% from last yearâs levels.
2 FTSE 100 dividend heroes
Clearly, the landscape is fraught with danger for those seeking big dividends from UK shares. But it doesnât mean they need to throw in the towel and give up. Here are two rock-solid FTSE 100 dividend stocks that should continue paying big dividends in 2020 and beyond:
- The reliable nature of weapons demand means that BAE Systems should continue growing dividends in the near term. The economic landscape means that it could endure some earnings lumpiness in the immediate future due to unfavourable contract timings. But the long-term outlook for the FTSE 100 defence giant remains robust. And it has the balance sheet strength to sail through such problems and keep hiking shareholder payouts. City analysts agree, so BAE Systems sports a mighty 4.7% dividend yield for 2020, moving to 4.9% for 2021.
- Admiral Group is another top pick for nervous dividend investors today. This UK share actually reinstated a special dividend it had postponed for 2019 following blowout results for the first half. The FTSE 100 insurer can be expected to remain a top dividend payer in 2020 too, thanks to its ultra-defensive operations and the likelihood of more reserve releases. City forecasts currently leave Admiral boasting a mighty 5.5% forward dividend yield.
More great UK shares Iâd buy today
With the help of experts like The Motley Fool you can avoid the dividend traps thatâs caught so many UK share investors out in 2020. The London Stock Exchange is packed with top income shares like those FTSE 100 heroes Iâve mentioned above. And you can dig out even more with the The Motley Foolâs epic library of exclusive reports.