Shareholders lose dividends under banking bail-out plan

The banking bail-out plan of the governments is a good thing for the banks themselves, but not for all the small shareholders. They will not receive any dividends from their investments, not only this year but also the next couple of years they will receive nothing.

In the past years, banks have been paying about one fifth of their total profits. Several banks were planning of doing the same this year. But because of the bail-out plan, all profits of the banks have to be used to repay their debts to the taxpayer and not go towards the shareholders. A second reason to cut the dividends is that there is a lot of pressure on the banks in order to raise their capital.

For the small shareholders this is very bad news. A lot of shareholders are retired and now they lose a part of their income. For the people who invested on the long term, the loss of dividend is nothing compared with the loss they would have had if the banks went bankrupt.
This will also have an influence on the shareholders of funds which have bank shares. Some funds already removed the bankshares, some cannot do that because they have too much shares in banks.


After all what the shareholders of the banks have been through, now they have to deal with this new problem. I can understand that for the shareholders who are retired, this is even more severe. They probably bought shares so they could receive an extra income above their pension.
I agree when specialists say that the cut is nothing compared to the loss in case of bankruptcy. They lose their dividends during a few years, but if the banks go bankrupt, they don’t get any dividends at all and they lose the money they invested in the banks. I think that it’s better to use the money for more important things such as to pay back their biggest debts.

Source: The guardian - Shareholders lose dividends under banking bail-out plan

http://www.guardian.co.uk/money/2008/oct/13/banks-shares