Global dividend payments have fallen to their lowest level in more than a decade, as companies moved to protect their balance sheets amid the pandemic, and dealt a massive blow to investors who rely on payouts to grow them wealth.
Total shareholder payments fell from $ 108 billion to $ 382 billion, the lowest total in the second quarter since 2012, according to Janus Henderson’s global payments index, published on Monday.
The 22% decline was the worst since the asset manager launched the index in 2009.
In a best-case scenario, Janus Henderson now expects dividends to fall by 19% on an underlying basis this year, paying $ 1.18 trillion. The worst case scenario could see payouts drop 25%, paying $ 1.10 trillion.
“Despite the cuts so far, we still expect global dividends to exceed $ 1 trillion this year and next,” said Jane Shoemake, investment director, global equity income at Janus Henderson.
NESL Nestlé,
Rio Tinto RIO,
and China Mobile 941,
were the three largest dividend payers, the report found, while Microsoft MSFT,
was the sixth largest payer, followed by AT&T T,
in the seventh place.
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Dividends fell in all regions of the world, except in North America, thanks in particular to resilience among Canadian companies, where dividends grew 4.1%. This makes Canada one of only two major countries to see payments increase.
Only 10% of U.S. companies cut their payouts, with the ‘vast majority’ choosing instead to stop buying shares, which totaled $ 700 billion in 2019, according to Goldman Sachs estimates.
Blue chip names in the US that cut the payments included Boeing BA,
General Motors GM,
Halliburton HAL,
and Walt Disney DIS,
The report notes that U.S. companies set their dividends once a year and pay them in four equal installments as of the fourth quarter, meaning investors are more likely to see the impact of the pandemic on payouts near the end of the year.
The least affected regions were Europe and the United Kingdom, which saw declines of 45% and 54%, respectively, on an underlying basis.
To read:Pandemic ‘wreck’ FTSE 100 dividend outlook for 2020, as UK payouts fall to lowest level since 2014
Shoemake said most European companies pay only once a year in the second quarter, so a cancellation of dividends has a disproportionately large impact on the annual total, but it also means that 2021 will have to show a rebound in Europe. “For the UK, handball will be smaller because several companies, not least oil giants Shell and BP, have taken the opportunity to reduce their payouts to a lower level,” she said.
In April, Royal Dutch Shell RDSA,
lost its crown as the largest dividend payer in the world because it delayed the payout for the first time since World War II, while BP in August,
cut its dividend in half after the oil major posted a $ 16.8 billion loss for the second quarter.
However, several UK companies have announced plans to recover dividends in recent weeks. On Monday, Bunzl BNZL,
the FTSE 100-denominated distribution group, said it would revise its previously issued final dividend to a better-than-expected trading performance in the first half of the year.
France, Europe’s largest dividend payer, saw total dividends reach their lowest level in at least a decade, although some of the lost French income will be recovered later in 2020, Janus Henderson said.
To read: European banks told to keep dividends
Nearly half of Europe’s dividend cuts came from the banking sector, as the Bank of England’s regulating pressure to release capital during the crisis in coronavirus saw HSBC,
Default Chartered STAN,
Barclays BCS,
and Lloyds Banking Group LLOY,
all cancel their payments.
In July, the European Central Bank said lenders should refrain from paying dividends and repurchasing shares until January 2021, to help banks absorb losses during the pandemic.
.
