Ignore The Dividend Yield On U.K. Banks - It's Irrelevant Now

Of course we all face market risk all the time. What is less well known is that we face political risk all the time as well.
For example, the London banks may or may not be well capitalised. We've been insisting, for a decade, that they must be but perhaps coronavirus changes that?
Whether they are or not though the political pressure is going to be that they must cancel dividend distributions. This makes their yields irrelevant of course.
British banks are looking good
The four main British banks are looking like interesting investments at present. Dividend yields are excellent and as a result of the problems 12 years ago all of them are well capitalized. There's no risk - OK, no risk unless civilization itself is going down the tubes - of their going bust.
So, strong capitalization, high dividends, sure there's a certain economic problem to be faced at present but why not buy into such an income stream at such agreeable prices?
The answer as to why not being that hoary old bugbear, politics. The European Central Bank has decided that European banks, which face rather greater problems, should not be allowed to pay dividends at present. OK. But this creates political pressure for the same practice to be forced upon the British banks. I don't think they need it but as an avid observer of - and sometimes participant in - British politics I don't think this pressure will be resisted.
I expect - without 100% certainty you understand - British bank dividends to be cancelled. Even to the possible extent of the non-payment of those already announced.
The British banks
The domestic - retail if you prefer - British banks had a torrid time of it in the last crisis. Lloyds (OTC:LLDTF) took over Halifax, that one action taking it near to bankruptcy without government intervention. Royal Bank of Scotland (OTC:RBSPF) was pretty much bust without the government intervention. Barclays (OTC:OTCPK: BCLYF) survived through new capital from Qatar, the... Read more