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Paying dividends is a ‘moral imperative’ to support people’s retirement, CEO says

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Companies have a “moral imperative” to pay dividends to shareholders during the coronavirus pandemic in order to support retirement income, according to Standard Life Aberdeen CEO Keith Skeoch.

With earnings season getting underway, a slew of corporates across Europe have announced that they will scrap forthcoming dividend payments, as the economic impact of the virus and worldwide shutdowns takes its toll.

A host of major banks, including Barclays, HSBC, Societe Generale and Standard Chartered have scrapped dividends in 2020 following pressure from the European Central Bank and Bank of England.

Speaking to CNBC Thursday, Skeoch defended SLA’s decision to pay out to shareholders, suggesting that it was essential in supporting people’s retirement.

“If there is a moral issue, it is that there is a substantial part of our society that is dependent on retirement income, and dividends, particularly at the time when interest rates are incredibly low, are an important part of that support for retirement income,” Skeoch told CNBC’s “Street Signs Europe.”

He went on to argue that companies with strong balance sheets and the “economic wherewithal” to pay dividends have a “moral imperative” to do so. However, Skeoch emphasized that those without room on the balance sheet should be looking at the long-term picture and focusing on survival.

“There is this balance between the economic impact and our stewardship obligations, so I think for those that can, there is a moral responsibility to pay,” he said.

In the U.K., 32 members of the FTSE 100 had moved to cut dividends as of Wednesday, with just 10 firms now expected to pay two-thirds of the index’s dividends for 2020, according to research by investment platform AJ Bell.

The aggregate consensus forecast for FTSE 100 2020 dividend payments comes to £64 billion ($79.8 billion), down from £85 billion in 2018 and £75 billion in 2019.

“Of the top 10 payers by actual size of distribution, Shell and BP have both offered trading statements which have emphasized how cuts to capital investment, cost reductions, asset disposals and fresh debt would provide ample liquidity,” AJ Bell Investment Director Russ Mould said in a research note Wednesday.

“Shell suspended its buyback program but neither firm even mentioned the dividends, to suggest Shell and BP seem determined to defend their planned payments.”

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