The impact of COVID-19 on LIC/LIT dividends and distributions

Continuing with our analysis of the COVID effects on the LMI sector in our last edition, this month we look at the effects on dividends/distributions paid over the past year. The COVID shutdown led to massive economic disruption both here and abroad and the deferral, cancellation and cuts to dividends was one of the major features of many underlying companies/investments. Domestically, a third of the S&P/ASX 100 stocks reduced, deferred, suspended or cancelled dividends in the wake of the March-2020 crash. Internationally, the slash in dividends paid is estimated at 17%-23%, equating to around US$400 billion.

So how did the LIC/LIT sector fare in the wake of this challenge? It is unsurprising the company dividend cuts have flowed through to LIC/LIT dividend/distribution cuts.

Overall, the past twelve months has not been good for LIC/LIT investor dividends/distributions unless they happened to be concentrated in International or a select group of LICs/LITs. That said, the more diversified nature of many LICs/LITs meant that dividend/distribution decreases on the whole were lower than what was seen in the markets. With the recent 1H’FY21 reporting season completed and the economy rebounding from the COVID disruption, the prospect looks good for improved dividend/distribution levels moving forward.

Read our report for the full analysis.