The Samsung Electronics Seocho office building in Seoul, South Korea, on January 13, 2017.
Jean Chung | Bloomberg | Getty Images
Corporate payments to shareholders are projected to reach $ 1.39 trillion by 2021, just 3% below their pre-pandemic peak, according to a new report from British asset manager Janus Henderson.
Dividend payments in the second quarter jumped 26% from the same period last year to $ 471.7 billion, just 6.8% below levels seen in the second quarter of 2019. Janus Henderson projected that dividend payments will return to pre-pandemic highs in the next 12 months.
The survey, released on Monday, said 84% of companies worldwide increased or maintained their dividends compared to the same quarter in 2020.
Much of the growth was attributed to companies that restarted frozen payments and issued higher special dividends due to strong gains. The underlying dividend growth in the second quarter, which eliminated the effects of special dividends and exchange rates, was 11.2%.
Samsung surpassed Nestle as the world’s largest contributor to the dividend, with Rio Tinto, Sberbank and Sanofi also among the top five.
Samsung distributed a total of $ 12.2 billion to investors once its usual dividend is included, and Janus Henderson predicts it will likely be among the top five taxpayers in the world throughout 2021.
“The rebound has been much stronger than we expected and I think it’s very encouraging to see that these companies feel strong enough to return cash to shareholders,” said Jane Shoemake, client portfolio manager for equity income. Janus Henderson told CNBC Monday.
Geographical divergence
Payments in the UK rose 60.9% and in Europe rose 66.4%, while most dividend cuts occurred in emerging markets, according to the report, which reflects the delayed impact of lowest profits reported in 2020. He said dividend cuts in developed markets were “preventive and preventative”.
Meanwhile, North America recorded record dividends in the second quarter, driven by Canada. However, payments in the region had been largely maintained until 2020, which meant there was little rebound effect.
In the Asia-Pacific outside of Japan, main dividend growth was 45% year-on-year in the second quarter, driven by Samsung’s single special dividend, with South Korea and Australia leading growth in the region. However, Singapore was constrained by restrictions on bank payments.
Japanese dividend payments also remained solid in 2020, but still managed an underlying growth of 11.9% year-on-year.
However, in emerging markets, dividends fell 3.2% annually on an underlying basis, reduced by lower earnings in 2020, while only 56% of emerging market companies increased or maintained dividends on a stable basis. during the second quarter.
Implications of the portfolio
Mining firms showed the fastest growth as a result of rising commodity prices, while industrial and consumer discretionary firms also recovered strongly, Janus Henderson’s research showed. So-called defensive sectors, such as telecommunications, food, and household products, maintained their characteristically consistent one-digit growth rates.
“In terms of the highest-performing sectors, the dividend outlook for financial services and commodities is the best since last year,” said Ben Lofthouse, head of Janus Henderson’s equity income.
The firm has been adding positions in these sectors in its equity allocations over the past twelve months to try to capitalize on this rebound. Many banks and financial services companies were subject to regulatory restrictions on dividend payments during the pandemic, which are now beginning to rise.
“The travel and leisure sectors remain the hardest hit in terms of the Covid impact, and while many have adjusted their operations to survive, the sector is unlikely to pay dividends until the balance sheets are recovered, so we continue to avoid them over time, ”Lofthouse added.