Law Debenture Corporation (LON:LWDB) declared, and our shareholders overwhelmingly approved, a 50% increase in our final dividend payment for 2019 earlier this year. This step change in dividend brought our dividend yield from 3.5% for the year ended 31 December 2018 to 4.0% for the year ended 31 December 20191. The 2019 full year dividend per share was 26.0p (up 37.6%).
· Moving to quarterly dividends, creating greater regularity and predictability around dividend payments
· Declaring a first interim dividend of 6.5 pence per ordinary share payable in July 2020
· Further interim dividends of 6.5 pence per ordinary share expected in October 2020 and in January 2021
· Board’s current intention for the full year 2020 dividend to be at least equal to 2019 dividend of 26.0 pence per share
With significant turmoil in global markets as a result of the Covid-19 pandemic, a large number of quoted companies have cut their dividends in order to protect the long term future of their businesses. This is happening at a time when the recipients of those dividends may themselves be increasingly reliant on that income. The great advantage of the investment trust structure is the ability to retain a portion of income received each year in order to smooth dividends in times of market stress.
With that backdrop, the unique advantage of the Law Debenture structure has never been more evident. We approach 2020 with a professional services business that has funded 35% of dividends for the investment trust over the preceding 10 years and group retained earnings of £62.5m2. The combination of this diversification of income and the strength of our reserves provides us with a genuine competitive advantage over other equity income trusts when forming our dividend policy.
We also announced we were moving to a structure of quarterly dividends. We felt paying quarterly dividends would help to provide our shareholders with greater regularity of dividend income, which we hoped would prove attractive to new and existing shareholders. This has proved timely, as yield becomes increasingly scarce and shareholders’ cash flows constricted.
With that back drop, the Corporation is delighted to declare a first interim dividend of 6.5 pence per ordinary share in respect of the year ending 31 December 2020. This dividend will be paid on 28 July 2020 to shareholders registered at the close of business on 26 June 2020. The Corporation’s shares will go ex-dividend on 25 June 2020. Based on the current share price, that implies a dividend yield for the Law Debenture share of 4.9%3
We intend to pay two further interim dividends of 6.5 pence per ordinary share in October 2020 and January 2021. Shareholders will be asked to vote on a final dividend to be paid in April 2021 at the Corporations 2021 AGM. It is the Board’s current intention to recommend the final dividend payment be at least 6.5 pence per share.
