Dividends could fall $500bn says Janus Henderson

Global company dividends for 2020 could fall as much as 35% — almost $500 billion — according to the worst-case scenario in the latest Janus Henderson Global Dividend Index.

Listed companies worldwide are cancelling or postponing dividends to preserve cash amid the coronavirus crisis.

Global company dividends rose to a new record of $1.43 trillion in 2019.

But for 2020, the Janus Henderson Global Dividend Index said on Monday that its worst-case scenario sees a decline of 35% this year to $933 billion.

The index’s best-case scenario sees a decline in global dividends of 15% this year to $1.21 trillion, a drop of $213 billion.

The index reported there was almost no pandemic impact on 2020 first-quarter dividends, which rose 3.6% to a Q1 record of $275.4 billion.

Ben Lofthouse, co-manager of global equity income at Janus Henderson said: “This downturn does look likely be very steep, but the support from governments and central banks has been on an unprecedented scale, which we can only hope will make any recovery swift.

“Dividend suspensions are inevitable due to the sudden, unprecedented halt in economic activity in many countries.

“For 2020, Q1 dividends have been paid so the full peak-to-trough impact is likely to be seen over the next 12 months or so.

“In many cases changes to dividend policies reflect the inability to predict when things return to ‘normal’, but a new factor is the consideration of the relationship between government support and company behaviour.

“In some cases, dividend changes, along with executive pay moderation, are an acknowledgement or even requirement that shareholders should be part of society’s Covid-19 response.

“In 2019, over two fifths of the world’s dividends were paid by defensive sectors that will be relatively insulated from the recession.

“Another two fifths were paid from more economically sensitive companies that are facing actual or potential cuts, while amongst the remaining fifth the impact will be mixed.

“Both sector and geographical location are having a significant impact on the ability to pay dividends, which of course, highlights the value of taking a global approach to income investing.

“Diversification across a wide variety of territories is extremely valuable and investors achieve far superior sector diversification by thinking globally rather than focusing on any one country or region.”