Investment Update – Disappearing Dividends Should Return:
The Prime Minister recently announced the gradual easing of lockdown restrictions nearly two months after they were imposed. The restrictions have been largely successful in containing the spread of the coronavirus new cases have steadily declined since early April and the number of deaths is falling too.
However, the slowdown of economic activity has taken a heavy toll on growth. The Bank of England thinks the economy could shrink by 14% this year, although it also forecasts a strong recovery in 2021.
The impact on the global stock markets has been well documented, both by the Omnis investment team and the media. After a sharp fall in February, shares have recovered, mainly thanks to the unprecedented support and measures launched by governments and central banks.
The markets remain sensitive to new developments, as demonstrated by last week’s pause, and should continue to fluctuate as we gradually return to normality.
Periods of market turbulence like we have recently experienced are to be expected when you invest in shares. As long as you avoid any knee jerk reactions, then you should be rewarded for holding your investment over the long term. However, another consequence of the coronavirus crisis that may cause concern, particularly for those who rely on their portfolio to generate an income, is the number of companies that have stopped paying dividends.
When you invest in a share, you buy a small piece of the underlying company. Generally, you hope to receive a return if the price of the share has risen once you sell. In some cases, your ownership stake also entitles you to a portion of the profits earned by the company. It distributes these profits by issuing a payment known as a dividend.
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