July 5

FTSE 100 shock: BT just cut its dividend. Here’s what I’d do now

first_img In a shock to FTSE 100 income investors, BT (LSE: BT.A) cut its dividend yesterday. Hitting investors with a triple blow, the telecommunications company advised that it was suspending both its final 2019–20 dividend and all dividends for 2020–21, and that it was expecting to resume dividends in 2021–22 with a payout of 7.7p per share. That equates to just 50% of last year’s payout.Here I’ll look at what the dividend cut from BT means for FTSE 100 income investors. I’ll also explain how I’d go about building a robust dividend portfolio today.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…The game has changed for FTSE 100 income investorsOne thing I’ve always said about dividend investing is that you have to do your research. It’s not as simple as it seems. Before buying a dividend stock, it’s important to look at factors such as revenue and earnings growth, debt, and dividend coverage (the ratio of earnings per share to dividends per share). Buying a stock simply because it has a high yield generally doesn’t end well.Looking at BT, there were certainly warnings signs that it might cut its dividend. In fact, I’ve been warning that BT could cut its dividend for years now. For example, all the way back in late 2017, I said that BT’s huge debt pile and monstrous pension deficit “could have implications for the dividend payout”. Then, late last year, I said: “I believe it’s only a matter of time until we see the payout cut”. More recently, on 12 March, I said: “I think there’s a good chance [the dividend] will be cut in the near future, due to the company’s large debt pile and pension deficit”. Those that focused on the risk factors here may have avoided the cut. The Covid-19 crisis has only reinforced my view on dividend investing. Nearly all the high-yielding stocks in the FTSE 100 have cut their dividends recently. Those who were hanging on to struggling companies just for the yield have been hit hard. Clearly, the game has changed for income investors.How I’d build a dividend portfolio todaySo, what’s the best way to build a dividend portfolio today?Well, the first thing I’d do is focus less on high yield and more on sustainable yield.I’d forget about struggling companies like BT and instead look for companies that have attractive long-term growth prospects, solid balance sheets, good dividend growth track records, and healthy levels of dividend coverage. Companies with these attributes are less likely to cut their dividends.Some examples of these types of companies include the likes of consumer goods firm Unilever, accounting software specialist Sage, and healthcare company Smith & Nephew. None of these FTSE 100 companies pay huge dividends. However, they are all reliable dividend payers. None have cut their dividends, so far.Of course, I’d also diversify my capital over many different dividend stocks in order to reduce portfolio risk.It’s never been more important to do your research before buying a stock for its dividend. If you’re looking for more information on dividend stocks, you’ll find plenty of valuable insight right here at The Motley Fool. I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Enter Your Email Address Edward Sheldon, CFA | Friday, 8th May, 2020 | More on: BT-A Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Our 6 ‘Best Buys Now’ Shares “This Stock Could Be Like Buying Amazon in 1997”center_img Edward Sheldon owns shares in Unilever, Sage, and Smith & Nephew. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Sage Group. 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. Simply click below to discover how you can take advantage of this. Image source: Getty Images FTSE 100 shock: BT just cut its dividend. Here’s what I’d do now I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. See all posts by Edward Sheldon, CFAlast_img read more