Janus Henderson says $ 220 billion in global dividend cuts in 2020

LONDON – Global dividends fell sharply in 2020 due to the coronavirus pandemic, with the amount of investor payouts falling by 12.2% to $ 1.26 trillion, according to new research.

As the international public health crisis spread around the world, which came to a standstill and business activity slowed down, dividend reductions and cancellations between the second and fourth quarters of 2020 amounted to $ 220 billion, according to the latest Global Dividend Index of the asset manager Janus Henderson.

The total amount of dividends paid out between April and December 2020 was $ 965.2 billion, noted Janus Henderson, who before the start of each year analyzes the dividends paid out by the 1,200 largest companies by market capitalization.

The dividend cut was the worst in the UK and Europe, the index found, and both accounted for more than half of the total reduction in payouts worldwide, “mainly due to the forced reduction in bank dividends by regulators,” Janus said. Henderson found.

However, dividend payouts were resilient in the United States and rose by a whopping 2.6% in 2020.

“North America performed so well, especially because companies were able to save cash and protect their dividends by rather suspending or reducing share buybacks, and because regulators were more lenient with the banks,” the report said.

Elsewhere worldwide, Australia has been hit hard, but China, Hong Kong and Switzerland have joined Canada among the top performing countries.

The drop in total dividends in 2020, to $ 1.26 billion, was just under Janus Henderson’s best forecast of $ 1.21 trillion, thanks to a less severe decline in fourth-quarter payouts than expected. Payments in the fourth quarter fell 14% on an underlying basis to a total of $ 269.1 billion.

The decline was less severe than expected, Janus Henderson noted, as some companies (they call Sberbank in Russia and Volkswagen in Germany) recovered the suspended dividends at full strength, while others, such as Essilor in France, reduced level.

“One in eight companies canceled its payout completely and one in five made a rebate, but two-thirds increased or kept their dividends steady,” he said.

On a sectoral basis, banks accounted for one-third of the global reduction in dividends by value, with nearly $ 54 million in dividend cuts and $ 34 million canceled within the industry, more than three times as much as oil producers – the next sector to be hit hardest is – just over $ 24 million in payouts cut and canceled.

Banks in the UK and the euro area have been subject to a temporary ban on shareholder payments since March last year due to concerns that banks could become capital-poor as a result of the coronavirus crisis. However, the Bank of England said in December that banks could resume limited dividends; The British bank Barclays announced last Thursday that it will resume dividend payments to shareholders.

The supervisory board of the European Central Bank, which has overseas banks in the region, also asked regional lenders last March not to pay cash dividends to shareholders, with the recommendation that would last until September 2021.

Jane Shoemake, investment director for world income earnings at the asset manager, noted that the pandemic’s “impact on dividends is consistent with a conventional, if severe, recession.”

“Sectors that depend on discretionary spending have been more strongly affected, while defense sectors have continued to make payments. At the country level, places such as the UK, Australia and parts of Europe have seen a greater decline as some businesses probably spread too much before the crisis. and as a result of drastic regulations in the banking sector. ‘

Looking ahead to 2021 and as coronavirus vaccines expand, raising expectations that economies could largely reopen in the summer, Janus Henderson predicted that payouts will continue to decline in the first quarter of 2021, although the decline is likely to be smaller than between the second and fourth quarters of 2020.

“The outlook for the full year remains extremely uncertain,” he said. “The pandemic has escalated in many parts of the world, even as the rollout of vaccines offers hope. It is important that bank dividends be resumed in countries where it has been curtailed, but it will not come close to 2019 levels in Europe and the UK. , and it will limit the potential for growth. ‘

According to Janus Henderson’s best-case scenario, the 2021 dividend will increase 5% on a net basis to a total of $ 1.32 billion.