LONDON – Global dividends fell sharply in 2020 due to the coronavirus pandemic, with investor payments falling 12.2% to $ 1.26 trillion, according to new research.
As the international public health crisis spread around the world, blocking and reducing trade, dividend cuts and cancellations totaled $ 220 billion between the second and fourth quarters of 2020, according to the latest global dividend index. of 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 largest 1,200 companies by market capitalization before the start of each year.
The reduction in dividends was the most severe in the UK and Europe, the index found, with both accounting for more than half of the total global pay cut, “mainly due to forced reductions in bank dividends by regulators”. found Janus Henderson.
US resistant
However, dividend payments were strong in the US, rising 2.6% depending on the title in 2020.
“North America has done so well, mainly because companies have been able to save cash and protect their dividends by suspending or reducing share buybacks, and because regulators have been more lenient with banks,” the report said. .
Elsewhere globally, Australia has been severely affected, but China, Hong Kong and Switzerland have joined Canada as one of the best performing nations.
The decline in total dividends in 2020 to $ 1.26 billion was just slightly lower than Janus Henderson’s best forecast of $ 1.21 trillion, due to a less severe drop in fourth-quarter payments. than anticipated. Fourth-quarter payments fell 14% on a base basis to a total of $ 269.1 billion.
Hundreds of people packed their shopping belts in Singapore in preparation for the festive season, despite the coronavirus pandemic (Covid-19), which recorded a total of more than 58,000 confirmed cases and 29 associated deaths in Singapore on December 12, 2020.
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The decline was less severe than expected, noted Janus Henderson, due to some companies (citing Sberbank in Russia and Volkswagen in Germany) restoring the suspended dividends to the maximum, while others, such as Essilor in France, have brought back to a low level.
“One in eight companies canceled their payments 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 one-third of global dividend reductions by value, with dividend reductions of nearly $ 54 million and canceled $ 34 million in industry more than three times as much. than oil producers – the next worst hit – who saw payments of just over $ 24 million reduced and canceled.
Banks in the UK and the eurozone have been temporarily banned from shareholder payments since March last year amid concerns that banks could lose capital as the coronavirus crisis escalates. However, the Bank of England said in December that banks could resume limited dividends; The British bank Barclays announced last Thursday that it will resume the payment of dividends to shareholders.
The Supervisory Board of the European Central Bank, which is the region’s overseas banks, also called on regional creditors in March last year to avoid paying cash dividends to shareholders, with a recommendation to run until September 2021.
Jane Shoemake, chief investment officer for global equity income at the asset manager, noted that “the impact of the pandemic on dividends was consistent with a conventional, albeit severe, recession.”
“The sectors that depend on discretionary spending have been more severely affected, while the defensive sectors have continued to make payments. At the country level, places such as the United Kingdom, Australia and parts of Europe have suffered a greater decline, as some companies were probably over-distributed before the crisis and due to regulatory interventions in the banking sector. “
Outlook
Looking to 2021 and as coronavirus vaccines are launched, rising expectations that savings could largely reopen by summer, Janus Henderson predicted that payments will continue to fall in the first quarter of 2021, although the decline is likely to be than between the second and fourth quarters of 2020.
“The outlook for the full year remains extremely uncertain,” he said. “The pandemic has intensified in many parts of the world, even though the launch of vaccines offers hope. Importantly, bank dividends will resume in countries where they have been restricted, but will not approach 2019 levels in Europe and the UK, and this will be limiting the growth potential. “
Janus Henderson’s best scenario records 5% dividends in 2021, globally, to a total of $ 1.32 trillion.