The Covid-19 crisis may have drawn US $ 220 billion (£ 156 billion) of global dividends out of investor pockets. However, a pick-up in the fourth quarter means the outlook is not as bad as feared and there should be a rebound this year.
The most recent report from the Janus Henderson Global Dividend Index shows that global income payments fell 12.2% to $ 1.26 billion over the past year as one in eight companies canceled dividends and one in five companies cut them when companies tried to Saving cash to prop up their balance sheets.
There were dividend cuts of $ 220 billion between April and December Autumn was shorter than expected as shareholders still enjoyed payments of $ 965 billion.
Janus Henderson had forecast a best-case scenario for dividends of $ 1.21 billion this year, but a better-than-expected final quarter boosted payments and ensured the decline in 2020 was less than it was after Financial crisis.
Payments for the final quarter were backed by Russian bank Sberbank and German automaker Volkswagen, which restored the suspended dividends, while French optics giant Essilor rolled back the shares at a reduced price.
North American dividends continued to drive the payouts last year, climbing 2.6% to a new record of $ 503.1 billion as companies paid out a burst of special dividends.
“North America has done so well largely because companies have been able to save cash and protect their dividends by instead suspending or reducing share buybacks, and because regulators have been more lenient with banks,” it said the report.
The cut in withdrawals from UK and European banks means It was in these regions that the dividend cuts were most severe. Together, they accounted for more than half of the total global dividend reduction, and distributions from these regions have fallen below the level of the 2009 financial crisis.
Banks around the world suffered from a tough 2020 when regulators and governments forced them to stop payments in order to have enough cash to weather the increased loan defaults. Banks have cut payments by $ 70 billion, one-third of the world’s dividend depreciation, more than three times as much as oil producers, who were the second hardest hit sector.
Companies sensitive to that Consumer Spending Restrictions When the world was trying to keep the pandemic under control, it was most likely to make cuts.
Dividends paid by retailers, auto companies, and leisure companies on consumer staples decreased 37% year over year between April and December, with 80% of leisure companies down.
Classic defensive stocks like grocery stores, pharmaceuticals, tobacco and personal care products were “barely affected”, although beverage makers were an “interesting exception” as dividends fell 15%.
“Usually, beverage manufacturers withstand economic downturns very well,” the report said.
“But during the pandemic, eateries around the world were either closed or severely restricted, so the critical on-trade business that delivers so much volume to beverage manufacturers at superior margins has dramatically declined.”
Although meant continued bans a stilted start to the year 2021Janus Henderson expects dividends to rise 5% this year to $ 1.32 billion. Dividends are expected to decrease further in the first quarter.
That optimism is fueled by the introduction of the vaccine and the resumption of bank dividends in many countries, although levels will remain limited.
Jane Shoemake, investment director for global equity income at Janus Henderson, said the dividend impact of the pandemic was “in line with a conventional, albeit severe, recession.”
She said that in the UK, Europe and Australia, dividends were more affected as many companies “arguably overdistributed” before the crisis.
Top payers of 2020
|2||AT & T.|
|5||JPMorgan Chase & Co.|
|6th||China Construction Bank|
|7th||Johnson & Johnson|
|10||Taiwan semiconductor manufacturing|
|Subtotal||$ 120.5 billion|
|% of the total||9.6%|
|11||China mobile device|
|16||Procter & Gamble|
|18th||Royal Dutch Shell (RDSA)|
|19th||Philip Morris International|
|Subtotal||$ 78.4 billion|
|Total||$ 198.9 billion|
|% of the total||15.8%|
Covid-19 wipes out $ 220 billion in Divis, but 2021 looks on