The coronavirus crisis last year saw global dividends fall to $1.26trn in 2020, down 12.2% on a headline basis.
That's according to the latest Global Dividend Index from Janus Henderson. Although an alarming fall, this was better than the best-case forecast of $1.21trn thanks to a less severe fall in Q4 payouts than anticipated.
On an underlying basis, dividends were 10.5% lower in 2020, a smaller decline than after the global financial crisis.
Janus Henderson’s index of global dividends fell to 172.4, a level last seen in 2017.
The dividend cuts were most severe in the UK and Europe, which together accounted for more than half the total reduction in payouts globally, mainly owing to the forced curtailment on banking dividends by regulators.
But even as payouts in Europe and the UK fell below the levels seen in 2009 when the index began, they rose 2.6% on a headline basis in North America to a new record.
North America did so well mainly because companies were able to conserve cash and protect their dividends by suspending or reducing share buybacks instead, and because regulators were more lenient with the banks.
In Asia, Australia was worst affected, thanks to its heavy reliance on banking dividends, which were constrained by regulators until December. Elsewhere, China, Hong Kong and Switzerland joined Canada among the best performing nations.
Q4 payouts fell 14.0% on an underlying basis to a total of $269.1bn while the headline decline was just 9.4%.
This was less severe than expected as companies like Sberbank (SBRCY) in Russia and Volkswagen (VWAGY) in Germany restored suspended dividends at full strength, while others like Essilor (EL.PA) in France brought them back at a reduced level.
Special dividends were also larger than expected, while in the US the dividends announced for the next four quarterly payments were better than expected.
Although the cuts and cancellations totalled $220bn between April and December 2020, companies nevertheless paid their shareholders $965bn, still far outweighing the reductions.
One company in eight cancelled its payout altogether and one in five made a cut, but two thirds increased their dividends or held them steady.
Banks accounted for one third of global dividend reductions by value, more than three times as much as oil producers – the next most severely affected sector.
Six in 10 consumer discretionary companies cut or cancelled payouts, but the classic defensives - food retail, pharmaceuticals and personal products - were well insulated.
Among the world’s larger stock markets, the impact in Spain and France was particularly widespread with 71% of companies making reductions compared to just 9% in Canada.
Jane Shoemake, Investment Director for Global Equity Income at Janus Henderson said: “Although the pandemic has changed the lives of billions in previously unimaginable ways, its impact on dividends has been consistent with a conventional, if severe, recession.
“The disruption in some countries and sectors has been extreme, but a global approach to income investing meant the benefits of diversification have helped mitigate some of these effects. Crucially, the world’s banks (which usually pay the largest share of the world’s dividends) mostly entered the crisis with healthy balance sheets.
"Bank dividends may have been restricted by regulators in some parts of the world, but the banking system has continued to function, underpinned by robust capital levels, which is vital for the smooth operation of economies."
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