2020 has proved to be a nightmare year for dividend investors. UK shares have slashed, postponed, or cancelled altogether shareholder payouts as the Covid-19 crisis has crushed balance sheets and decimated earnings outlooks. Around half of FTSE 100 companies alone have made serious changes to their dividend policies in a blow to investors’ income flows.
The bad news has got even worse on Tuesday. Today, mega miner BHP Group (LSE: BHP) announced that it was cutting the final dividend for fiscal 2020, to 55 US cents from 78 cents previously. The FTSE 100 giant saw pre-tax profits slump 10% in the 12 months to June. It cited lower copper and petroleum prices and Covid-19-related mine shutdowns.
BHP’s decision to scythe down the dividend didn’t come as a shock to some. As Link Group comments: “With dividend cover already so low (1.2 times last year) a cut was hard to avoid and will save BHP around £800m in 2020 alone.”
A FTSE 100 dividend share I’d buy today BHP follows other FTSE 100 alumni like Shell (LON:RDSa) and Bunzl (LON:BNZL) in recently cutting dividends. But it’s not all bad news. There are plenty of blue-chip UK shares I expect to continue doling out big payouts to their shareholders now and in the future. Housebuilder Persimmon (LSE: LON:PSN) is one of these.
While BHP was cutting dividends, the news coming from the housebuilder today has been much more positive. The FTSE 100 firm said it was reinstating the dividend with an interim payment of 40p. This is on account of its “strong” start to the second half of the year, with a near-50% jump in average weekly private sales since the beginning of July.
I’m expecting demand for its newbuilds to remain strong long into the future too, because of Britain’s huge housing shortage which will take years to fix. Its huge £2.5bn order book (up 21% year-on-year) is perfect evidence of this.
Okay, Persimmon can expect annual profits growth to slow in the near term as tough economic conditions weigh on property prices. But that aforementioned housing crunch should stop home values dropping off a cliff. And significant government support like Help to Buy and stamp duty holidays should support sales volumes.
Getting rich with UK shares At current prices, Persimmon trades on an undemanding forward price-to-earnings (P/E) ratio of 13 times. It carries an inflation-mashing dividend yield north of 4% for 2020 too.
I bought its FTSE 100 rivals Barratt Developments (LON:BDEV) and Taylor Wimpey (LON:TW) for my own ISA because of the bright outlook for these builders during this new decade. And I’d happily load up on Persimmon shares too.
Persimmon’s just one top-quality FTSE 100 dividend stock trading below true value right now. This is why we at The Motley Fool reckon the 2020 stock market crash offers an excellent opportunity for share investors to make big returns. And The Motley Fool’s vast library of special reports reveals even more too-cheap-to-miss UK shares to help you make a fortune from buying shares.
The post FTSE 100 dividend stocks: a UK share I’d buy in an ISA as BHP Group slashes payouts appeared first on The Motley Fool UK.
Royston Wild owns shares of Barratt Developments, Bunzl, and Taylor Wimpey. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020