According to fund manager Janus Henderson between the second and fourth quarters of last year, companies reduced dividend payments by a total of $ 220 billion globally, the total dividend paid was $ 965.2 billion in the April-December period and kicked in at $ 1,260 billion for the full year. This is a 12 percent decline for the full year last year, of which the year-over-year decline was 14 percent in the fourth quarter. (The fund manager examined the dividend payments of 1,200 of the world’s largest companies with market capitalization.)
More than half of the dividend cuts came from European companies (The EU and the UK), partly due to dividend cuts forced by regulators in the financial sector. In the United States, for example, dividend payments even rose in 2020, by 2.6 percent. This was largely due to the fact that U.S. companies were able to protect their cash holdings and dividends by curbing their own stock purchases. Canadian, Chinese and Hong Kong companies have also performed well in terms of dividend payments, according to Janus Henderson’s collection.
In terms of individual sectors, banks had the largest share of dividend reductions in total, while the other sector most affected was oil companies. In March, dividend payments by European banks were temporarily banned by regulators to protect their capital amid the coronavirus crisis. In December, the Bank of England had already authorized the resumption of dividend payments, with one of the major UK banks, Barclays, already starting to pay dividends. The ECB has also proposed suspending dividend payments to countries ’creditors until September 2021.
Janus Henderson expects dividends to fall further in the first quarter of 2021, although the rate of decline may be smaller than between the second and fourth quarters of 2020. Around this year’s outlook and economic recovery there is a lot of uncertainty, even as vaccinations have begun worldwide but are typically awaiting opening in the summer. In the banking sector, the fund manager does not yet expect dividends to return to 2019 levels in Europe.
The most optimistic scenario is that global dividend payments could rise 5 percent in 2021 compared to last year.
Cover image: In front of the Frankfurt Stock Exchange building, source: Shutterstock
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