Dividends to fall by $224bn in 2020 – Janus Henderson

Global dividends fell $55 billion or 11.4% to $329.8 billion in the third quarter of 2020 as companies cancelled and cut payouts during the coronavirus pandemic, according to the latest Global Dividend Index report from Janus Henderson.

The report said its best case scenario for the whole of 2020 now sees dividends falling by $224 billion to $1.2 trillion.

UK dividends fell 41.6% on an underlying basis to the lowest Q3 total in a decade — but some companies have started to restore payouts in recent weeks.

US Q3 dividends fell only 3.9% in underlying terms to $117.7 billion — because in the US lower share buybacks are bearing the brunt of the move by companies to preserve cash.

“The UK is suffering steeper cuts than most other parts of the world,” said the report.

“This is mainly thanks to a sector mix dominated by oil, banking and mining, a history of overdistribution among some key companies and because the concentration of dividends in the UK had left payouts reliant on a small number of very large companies.

“With banks barred from distributing cash, both the UK-listed oil majors slashing their payouts and Glencore cancelling its dividend UK payouts have been under significant pressure.

“UK dividends fell 47.0% on a headline basis in Q3, falling to $18.7bn, their lowest third-quarter total in a decade.

“The decline was exaggerated by sharply lower special dividends.

“On an underlying basis, payouts fell 41.6%, putting the UK behind many of its peers.

“On the positive side some companies (like industrial company Ferguson) have restarted payouts or declared the intention to do so in the fourth quarter, while others that we had considered vulnerable to cuts (like Diageo) are now back on our safe list.”

In its outlook, the report concluded: “The worst of the cuts are now behind us, but we do not expect dividends to grow until the anniversary of the global lockdown passes at the end of Q1 2021.

“Dividends are being impacted very differently around the world.

“Europe, the UK and Australia are the worst affected, Japan is somewhere in the middle, while emerging markets and North America are proving most resilient, partly because US dividends are shielded to an extent by reduced share buybacks.

“Our first estimate in April for this year saw underlying global dividends falling 15% on a best-case basis and 35% on a worst case; we narrowed this range to -19% to -25% in July.

“We are now confident the final result will be towards the top end of our expectations with a best-case underlying decline of 17.5% and a worst case of 20.2%.

“Our best case therefore sees payouts fall by $224bn to $1.20 trillion for 2020.”