LONDON – Global dividends fell sharply in 2020 due to the coronavirus pandemic. According to new research, the number of investor payouts fell 12.2% to $ 1.26 trillion.
As the international public health crisis spread around the world, causing lockdowns and restrictions on business, dividend cuts and cancellations between Q2 and Q4 of 2020 totaled $ 220 billion. This is evident from 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, according to Janus Henderson, who analyzes dividends from the 1,200 largest companies by market capitalization prior to the start of the year.
The index found that dividend cuts were most severe in the UK and Europe, with both combined accounting for more than half of the global decline in payouts, “largely due to regulators’ forced cut in bank dividends,” noted Janus Henderson.
However, dividend payouts in the US were stable, increasing 2.6% in 2020.
“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.
Elsewhere in the world, Australia was badly affected, but China, Hong Kong and Switzerland were among the best performing countries among Canada.
The 2020 total dividends decline to $ 1.26 billion was only marginally below Janus Henderson’s best-case forecast of $ 1.21 trillion as payouts declined less than expected in the fourth quarter. Fourth quarter payouts decreased 14% on an underlying basis to a total of $ 269.1 billion.
Hundreds of crowds crowded the shopping belt in Singapore to prepare for the holiday season, despite the coronavirus pandemic (Covid-19) that saw a total of over 58,000 confirmed cases and 29 deaths reported in Singapore on December 12, 2020.
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The decline was less severe than expected, noted Janus Henderson, as some companies (they cited Sberbank in Russia and Volkswagen in Germany) restored suspended dividends to full strength while others, like Essilor in France, brought them back to reduced levels.
“One in eight companies canceled their payouts altogether and one in five companies made a cut, but two-thirds either increased their dividends or kept them stable,” it said.
On a sector basis, banks accounted for one-third of the world’s dividend depreciation, with nearly $ 54 million in dividends cut and $ 34 million cut within the industry, more than three times what oil producers did – the next on Sector hardest hit – Slightly more than $ 24 million withdrawals cut and canceled.
Banks in the UK and the euro area have been suspended from temporary shareholder payout bans since last March amid fears that banks could run out of capital amid the coronavirus crisis. However, the Bank of England said in December that banks can resume limited dividends; UK bank Barclays announced last Thursday that it would resume dividend payments to shareholders.
The supervisory board of the European Central Bank, which includes foreign banks in the region, also asked regional lenders in March last year to avoid paying cash dividends to shareholders with the recommendation, which is valid until September 2021.
Jane Shoemake, investment director for global equity income at the wealth manager, noted that the “dividend impact of the pandemic was compatible with a conventional, albeit severe, recession.”
“Sectors that are dependent on discretionary spending were hit harder, while defensive sectors continued to pay. At the country level, places like the UK, Australia and parts of Europe saw more declines as some companies pre-crisis and regulatory intervention in the banking sector.”
Looking ahead to 2021 and the introduction of coronavirus vaccines, which raised expectations that economies could largely reopen by the summer, Janus Henderson predicted that payouts would continue to decline in the first quarter of 2021, although the decline is likely to be smaller will be as between the second and fourth quarters of 2020.
“The outlook for the full year remains extremely uncertain,” he stated. “The pandemic has worsened in many parts of the world, although the introduction of vaccines gives hope. The important thing is that bank dividends resume in countries where they have been restricted, but nowhere near 2019 levels in Europe and the UK will limit the growth potential. “
Janus Henderson’s best-case scenario is for the 2021 dividend to rise 5% on a headline basis to a total of $ 1.32 trillion.