Global dividends start to make a tentative recovery
With the impact of the pandemic still lingering, global dividends have dipped again this quarter although there are encouraging signs the worst is now over for investors.
Payouts in the third quarter dipped fell by $55bn to $329.8bn, the lowest since 2016, according to Janus Henderson’s latest dividend tracker.
The 11 per cent decline was less severe than in the previous quarter in part due to seasonal patterns emphasising parts of the world where payouts have held up. But it also shows that, with more than two thirds of companies increasing dividends, the worst has passed.
Jane Shoemake, Investment Director for Global Equity Income at Janus Henderson said: “The loss of $224bn in dividend income from around the world in 2020 is nothing to celebrate, but we have been encouraged by how resilient payouts have been in many parts of the world”.
China, Hong Kong and Canada were among the few countries with higher dividends. The third quarter is China’s big dividend season — payouts increased 3.3 per cent with three quarters of firms raising payouts or holding them steady.
The weakest results came from the UK, Australia and the Netherlands. Australian dividends have been among the hardest hit, falling 40.3 per cent with cuts from the banks having the biggest impact, while UK dividends plunged 41.6 per cent.
The worst declines across the quarter unsurprisingly came from consumer discretionary terms, down 43 per cent, and car manufacturers making some of the deepest cuts.
In the midst of the market fallout in April, Hanus Henderson could fall as much as 35 per cent this year. It has now revised its forecast with a best case scenario of a 17.5 per cent drop for the year. The worst case scenario would see a 20.2 per cent fall in payouts to $1.16 trillion.
“In 2021 Q1 will still be affected by reductions, but then things should pick up”, Shoemake said. “The big question mark is over the decisions the regulators in the UK, Europe and Australia will make around banking payouts. And of course, so much depends on the pandemic and the severity and duration of any further lockdowns.”