Janus Henderson cut global dividends by $ 220 billion by 2020

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

As the international public health crisis spread around the world, causing blockages and reducing business activity, dividend cuts and cancellations amounted to $ 220 billion between the second and fourth quarters of 2020. , according to the latest global dividend index by asset manager Janus Henderson.

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

The index found that dividend cuts were more severe in the UK and Europe, both together accounting for more than half of the total reduction in payments worldwide, “mainly due to the forced reduction in bank dividends by of regulators, ”Janus Henderson found.

However, dividend payments were tough in the United States, rising 2.6% in basic terms in 2020.

“North America did so well, mainly because companies were able to keep cash and protect their dividends by suspending or reducing share repurchases and because regulators were more lenient with banks,” the report found. .

Elsewhere in the world, Australia was hit hard, but China, Hong Kong and Switzerland joined Canada among the best-performing countries.

The fall in total dividends in 2020, to $ 1.262 billion, was slightly lower than Janus Henderson’s best forecast of $ 1.21 trillion, thanks to a less severe drop in fourth-quarter payments than expected. Fourth-quarter payments fell 14% on the basis, to a total of $ 269.1 billion.

The decline was less severe than expected, noted Janus Henderson, because some companies (citing Sberbank in Russia and Volkswagen in Germany) restored suspended dividends in full force, while others, such as Essilor in France, they returned them to a reduced level.

“One in eight companies canceled their payment altogether and one in five made a reduction, but two-thirds increased their dividends or kept them stable,” he said.

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

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

The supervisory board of the European Central Bank, which was part of the region’s overseas banks, also called on regional lenders last March to avoid paying cash dividends to shareholders with the recommendation that it be extended until September 2021.

Jane Shoemake, director of global asset income investments at the asset manager, noted that “the impact of the pandemic on dividends has been consistent with a conventional, albeit severe, recession.”

“Sectors that depend on discretionary spending have had a more severe impact, while defensive sectors have continued to pay. At the country level, places like the UK, Australia and parts of Europe have suffered a further decline because some companies they had been over-distributing before the crisis and due to regulatory interventions in the banking sector. “

Looking ahead to 2021 and as coronavirus vaccines develop, raising expectations that economies could largely reopen in the summer, Janus Henderson predicted that payments would continue to fall in the first quarter of 2021, despite that 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 noted. “The pandemic has intensified in many parts of the world, although vaccine deployments provide hope. It is important to note that bank dividends will resume in countries where they fell, but will not approach 2019 levels in Europe. and the United Kingdom, and that will limit growth potential. “

Janus Henderson’s best case scenario is that 2021 dividends will increase by 5% depending on the stock to a total of $ 1.32 trillion.