LONDON – Global dividends fell sharply in 2020 as a result of the coronavirus pandemic, with the amount of payouts to investors dropping 12.2% to $ 1.26 trillion, according to new research.
As the international public health crisis spread around the world, it led to corporate lockdowns and curtailments, dividend cuts and cancellations totaling $ 220 billion between the second and fourth quarters of 2020, according to the latest Global Dividend Index from asset manager Janus Henderson.
Still, the total amount of dividends paid out between April and December 2020 was $ 965.2 billion, noted Janus Henderson, who analyzes the dividends paid by the 1,200 largest companies by market capitalization for the beginning of each year.
Dividend cuts were most severe in the UK and Europe, the index found, both of which together accounted for more than half of the total reduction in global payouts, “mainly due to the enforced curtailment of bank dividends by regulators”, Janus Henderson discovered.
USA resilient
However, dividend payouts were resilient in the US, increasing 2.6% broadly in 2020.
“North America did so well mainly because companies were able to keep cash and protect their dividends by instead suspending or reducing share buybacks, and because regulators were more lenient with the banks,” it said. report.
Elsewhere worldwide, Australia was badly hit, but China, Hong Kong and Switzerland joined Canada as one of the top performers.
The fall in total dividends in 2020, to $ 1.26 billion, was just under Janus Henderson’s forecast of $ 1.21 trillion at best, thanks to a less severe drop in fourth-quarter payouts than expected. Fourth quarter payouts decreased 14% on an underlying basis to a total of $ 269.1 billion.
Hundreds of crowds thronged Singapore’s high street in preparation for the holiday season, despite the coronavirus pandemic (Covid-19) that recorded a total of more than 58,000 confirmed cases and 29 related deaths in Singapore on December 12, 2020.
Zakaria Zainal | Anadolu Agency | Getty Images
The decline was less severe than expected, Janus Henderson noted, as some companies (they called Sberbank in Russia and Volkswagen in Germany) recovered suspended dividends at full speed, while others, such as Essilor in France, brought them back to a reduced level.
“One in eight companies canceled their payout altogether and one in five made a cut, but two-thirds increased or maintained their dividend,” he said.
On a sector basis, banks accounted for a third of the global dividend cuts in value, with nearly $ 54 million in dividend cuts and $ 34 million canceled within the sector, more than three times as many as oil producers – the second most affected sector – which saw slightly more then $ 24 million payouts cut and canceled.
Banks in the UK and the eurozone have been subject to a temporary ban on shareholder disbursements since March last year over concerns that banks could be short of capital as a result of the coronavirus crisis. However, the Bank of England said in December that banks can resume limited dividends; British bank Barclays announced on Thursday that it will resume dividend payments to shareholders.
The board of trustees of the European Central Bank, which is foreign banks in the region, also asked regional lenders last March not to pay out cash dividends to shareholders with the recommendation that will last until September 2021.
Jane Shoemake, investment director for global equity income at the asset manager, noted that the “impact of the pandemic on dividends is consistent with a conventional, albeit severe, recession.”
“Sectors reliant on discretionary spending have been hit harder, while defensive sectors have continued to make payments. At country level, members such as the UK, Australia and parts of Europe are posting a greater decline, as some companies arguably over-distributed before the crisis and due to regulatory interventions in the banking sector. “
Outlook
Looking ahead to 2021 and as coronavirus vaccines roll out, raising expectations that economies could largely reopen by the summer, Janus Henderson predicted disbursements would continue to decline in the first quarter of 2021, although the decline is likely to be smaller than between fourth quarter of 2020.
“The outlook for the full year remains extremely uncertain,” he noted. “The pandemic has intensified in many parts of the world, even as vaccine roll-out offers hope. Importantly, bank dividends will resume in countries where they have been curtailed, but they will not get near 2019 levels. Europe and the UK are limiting growth potential. “
In Janus Henderson’s best scenario, dividends will rise 5% on an overall basis in 2021 to a total of $ 1.32 trillion.