Retail investors face round of dividend cuts

INVESTORS IN retail stocks are facing a round of dividend cuts as the high street battle takes its toll on profit margins. City analysts warn that the full impact of the fiercely competitive environment has not yet been fully appreciated either by institutional or retail investors.

They add that competition from Internet retailing will also have a damaging effect on retail property values, hitting asset valuations which traditionally support retail share prices.

This has already happened in the US where some Internet retailers such as online bookseller Amazon.com are worth more than high street rivals such as Barnes & Noble. "You could get to the stage where some of these properties are almost worthless," says one retailer.

Nick Bubb, retail analyst at SG Securities, says shareholders should brace themselves for more bad news. "Investors do need to start thinking about the possibility of lower dividends. Profit margins are on a structurally lower trend and dividend cover is under pressure. Pay-outs will have to be cut."

The trend has already started with Storehouse, the struggling Bhs and Mothercare retailer, passing its dividend completely last month after it reported a pounds 22m loss. Hamleys , the toy retailer, cut its pay-out by a third in October after it reported a slump into loss.

Other retailers tipped to cut their dividends include Arcadia, House of Fraser, Great Universal Stores and Monsoon. Ottakar's, the bookseller which is examining its strategic options after a profits warning last week, is unlikely to pay a final dividend.

There is continuing speculation that Marks & Spencer will cut its final pay-out despite hints from the company two weeks ago that it might pay a maintained dividend from reserves.

Arcadia, led by John Hoerner, is the most likely major retailer to cut. After a profits warning last month, the shares yield 13 per cent. The group paid out a full-year dividend of 11.7p per share last year but Williams de Broe and Gilbert Eliott are forecasting a cut to 8p and 6p respectively. SG Securities has reduced its dividend forecast from 11.7p to 5p.

House of Fraser is not forecast to reduce its dividend but with cover down to just one times it must be under threat. Cover at Great Universal Stores is also becoming thin after last week's profits warning which wiped 20 per cent of the shares. They now yield 6 per cent.

Marks & Spencer would be the biggest retailer to cut its pay-out. Two weeks ago Robert Colvill, finance director, appeared to be steering the markets away from expecting such a move, saying: "Remember, we have a strong balance sheet."

But several brokers including SG Securities and West LB Panmure are forecasting a drastic cut in the dividend from 14.4p per share to a range of 6p-7p.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Day In a Page

General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
Public relations as 'art'? Surely not

Confessions of a former PR man

The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

Bill Granger's luxurious sweet treats

Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

The mother of all goodbyes

Paula Radcliffe's farewell to the London Marathon will be a family affair
Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

Steven Naismith: 'We know we must do better'

The Everton forward explains the reasons behind club's decline this season
Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions