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

LONDON – Global dividends fell dramatically in 2020 due to the coronavirus pandemic, with the value of payments to investors falling 12.2% to $ 1.26 trillion, according to new research.

As the international public health crisis spread across the world, leading to blockages and reducing business activity, dividend cuts and cancellations totaled $ 220 billion between the second and fourth quarters of 2020, according to the latest Index of Global Dividends by asset manager Janus Henderson.

Still, the total amount of dividends paid 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 cap before the start of each year.

Dividend cuts were more severe in the UK and Europe, the index found, with both together accounting for more than half of the total reduction in payments globally, “mainly due to the forced cut of bank dividends by regulators,” concluded Janus Henderson.

However, dividend payments were resilient in the United States, increasing 2.6% on a main basis in 2020.

“North America did very well mainly because companies were able to conserve money and protect their dividends by suspending or reducing share repurchases, and because regulators were more tolerant of banks,” the report concluded.

In other parts of the world, Australia has been badly affected, but China, Hong Kong and Switzerland have joined Canada among the top performers.

The decline in total dividends in 2020, to $ 1.26 billion, was only slightly less than Janus Henderson’s best-case forecast of $ 1.21 trillion, thanks to a less severe drop in fourth quarter payments. than expected. Fourth quarter payments fell 14% on a basic basis, to a total of $ 269.1 billion.

The decline was less severe than expected, Janus Henderson noted, due to some companies (they cited Sberbank in Russia and Volkswagen in Germany) restoring suspended dividends with full force, while others, like Essilor in France, brought them in. back at a reduced level.

“One company in eight canceled the payment entirely and one in five cut it, but two-thirds increased their dividends or kept them stable,” the document said.

On a sectoral basis, banks accounted for a third of global dividend reductions by value, with nearly $ 54 million of dividend cuts and $ 34 million canceled within the industry, more than three times more than oil producers – the next most severely affected sector – which saw just over $ 24 million in payments cut and canceled.

UK and eurozone banks have been subject to temporary bans on payments to shareholders since last March, amid concerns that banks may run out of capital due to the coronavirus crisis. However, the Bank of England said in December that banks may resume limited dividends; British bank Barclays announced on Thursday that it would resume paying dividends to shareholders.

The supervisory board of the European Central Bank, which has banks abroad in the region, also asked regional creditors last March to avoid paying dividends to shareholders with the recommendation that would last until September 2021.

Jane Shoemake, investment manager for global equity income at the asset manager, noted that the “pandemic impact on dividends was consistent with a conventional, though severe, recession.”

“Sectors that depend on discretionary spending have been affected more severely, while defensive sectors have continued to make payments. At the country level, places like the UK, Australia and parts of Europe have suffered a greater decline because some companies were probably over-distributing. before the crisis and because of regulatory interventions in the banking sector. “

Looking at 2021 and as coronavirus vaccines are launched, raising expectations that savings could reopen largely in the summer, Janus Henderson predicted that payments would continue to fall in the first quarter of 2021, although the decline is likely to be less than between the second and fourth quarters of 2020.

“The outlook for the entire year remains extremely uncertain,” he noted. “The pandemic has intensified in many parts of the world, even with the launch of vaccines giving hope. It is important to note that banking dividends will resume in the countries where they have been reduced, but will not come close to 2019 levels in Europe and the UK, and this will limit the potential for growth. “

Janus Henderson’s best-case scenario sees the 2021 dividend up 5% on a headline basis, to a total of $ 1.32 trillion.