Savers’ lifeline as Tesco mulls £550m payout: 220,000 small investors in line for dividend
Tesco is expected to press ahead with a £550m dividend for shareholders this week.
The supermarket giant is likely to post a rise in annual profits from £1.56 billion to £1.85 billion on Wednesday, as boss Dave Lewis prepares to bow out after six years in charge.
The company’s results cover the year to February, before social distancing measures were enforced in a bid to halt the spread of coronavirus.
Bowing out: Boss Dave Lewis (pictured) is preparing to quit Tesco after six years in charge
Like other supermarkets, in recent weeks it has seen a surge in sales from panic buying.
A dividend payout would come as a relief to some 220,000 small shareholders, after several other blue-chip giants cancelled theirs in the face of coronavirus uncertainty.
Millions of savers will also benefit through their pension fund, with Tesco one of the most widely held stocks. Banks were last week ordered by the Prudential Regulation Authority to scrap dividend payments in order to conserve capital so they can lend to small firms and households.
However, there is no constraint on businesses in other sectors paying a dividend if they can afford to do so.
Supermarket Morrisons has scrapped its special dividend while investment giant Standard Life Aberdeen last week said it will pay out £300m to investors.
Tesco has billions of pounds due to fill up its coffers from the sale of businesses in Thailand and Malaysia. It was expected to pay a £5 billion special dividend from the proceeds, worth 51p per share.
The supermarket has already paid a 2.65p per share half-year dividend, and analysts now expect it to pay another 5.62p per share for the second half, worth about £550m.
However, there could be a backlash if Tesco goes ahead with the dividend as supermarkets have been granted emergency tax breaks designed to ease the impact of the pandemic on retailers.
A Tesco spokesman last night insisted the board was yet to make a decision.
Russ Mould, investment director at broker AJ Bell, said it meant Tesco bosses would be thinking about ‘whether paying out dividends in the current environment is a good look or not’.