In 2024, we’ve seen massive dividend cuts from numerous well-known UK-listed corporations. In February, Glencore lowered its dividend by 70% whereas in March, Vodafone introduced it could be slashing its payout by 50%.

Wanting throughout the UK market immediately, I believe there are a number of extra corporations that might probably announce dividend cuts within the close to time period. Right here’s a FTSE 250 inventory whose excessive yield appears to be like susceptible, for my part.

An enormous yield immediately

The corporate I’m going to zoom in on is funding administration agency abrdn (LSE: ABDN).

In recent times, this firm’s paid out some large dividends to its shareholders. Final yr, the full payout was 14.6p, which interprets to a yield of about 10% on the present share price.

Nevertheless, I’m not satisfied this payout’s sustainable. Crunching the numbers, I consider a considerable reduce’s probably within the close to future.

A reduce coming?

One cause is that earnings per share this yr are solely anticipated to quantity to 12.2p. In different phrases, they received’t cowl final yr’s dividend payout. Subsequent yr, earnings are anticipated to rise to 13.4p per share, nonetheless not sufficient to cowl the dividend.

One more reason I reckon a reduce’s on the horizon is that the corporate’s paid out 14.6p per share for 4 years now. So there’s been zero progress within the payout for some time. Typically, this sample comes earlier than a reduce. I’ve seen it with numerous corporations (Vodafone’s an awesome instance right here).

A 3rd challenge right here is that abrdn’s CEO Stephen Chook stepped down final month. I believe a change in management may end in a brand new capital allocation coverage. I wouldn’t be shocked in any respect if the brand new incoming CEO regarded on the large dividend (which isn’t coated by earnings) and took an axe to it so as to free up some money.

One different factor price mentioning is that quick sellers are at the moment sniffing round this inventory. They anticipate its share price to fall. This may very well be associated to a potential dividend reduce. Typically, when corporations reduce their payout, their share costs fall too (in a double blow to traders).

I’m steering clear

It’s price declaring that the yield may nonetheless be enticing after a reduce. For instance, if the corporate was to slash its payout by 50%, the yield may nonetheless be round 5%, or presumably increased if the share price was to fall.

Nevertheless, personally, I wouldn’t be tempted by this yield. In recent times, this enterprise has been struggling to compete with passive funding managers like iShares and Vanguard, so there’s some uncertainty in relation to its long-term prospects.

I do suppose the corporate’s latest transfer to purchase Interactive Investor was savvy. That’s an awesome funding platform with loads of progress potential. I additionally like the very fact the corporate’s specializing in Asia and different investments.

All issues thought-about although, I believe there are higher dividend shares to purchase for my portfolio immediately.