The economic turmoil caused by the Covid-19 pandemic pushed third-quarter shareholder payouts to their lowest level since 2016, according to the latest snapshot, with the UK recording the biggest falls.
Janus Henderson is now warning that dividends for the whole of 2020 are likely to drop at least 15.7%, which would “eradicate” more than three years of dividend growth and cost investors $224bn (£170bn) in lost income this year.
The asset manager’s latest Global Dividend Index shows shareholder payouts slumped 14.3% or $55bn in the third quarter to $329.8bn. It comes after nearly a third of the 1,200 global firms tracked by the report either cut or cancelled their shareholder payouts for the quarter.
Overall, the largest declines came from non-essential consumer goods companies, where dividends were down 43% on an underlying basis – which is an adjusted figure accounting for special dividends, foreign exchange and the timing of payouts. Dividends from car manufacturers and leisure firms suffered the biggest cuts in that sector.
Media, aerospace and banks were also severely affected, while pharmaceuticals, food producers and food retailers offered the largest payouts over the quarter.
The UK was the hardest-hit region, with dividends falling 47% on a headline basis to $18.7bn. That was partly due to a regulatory ban on bank dividends throughout 2020, meant to provide a larger capital cushion to weather an economic downturn linked to Covid-19.
The Bank of England is currently reviewing that position and could allow lenders to restart payouts in 2021. A decision is expected in December.
UK dividends were also hit by lower payouts from oil and mining giants such as BP, Royal Dutch Shell and Anglo American, while Glencore cancelled its dividend. The cuts have come amid a sharp fall in commodity prices, due to falling fuel demand and a slowdown in manufacturing.
Australian dividends also fell sharply, down more than 40% to $9.6bn, which marked the lowest third quarter total in at least 11 years. The Netherlands was also severely impacted by a drop in payouts from its banks and brewers.
Jane Shoemake, an investment director at Janus Henderson, said the global dividends would continue to fall in the first three months of 2021, “but then things should pick up.”
“The big question mark is over the decisions the regulators in the UK, Europe and Australia will make around banking payouts. And of course, so much depends on the pandemic and the severity and duration of any further lockdown,” Shoemake added.
US companies, which usually account for around 40% of the world’s dividends, suffered a much smaller decline, with shareholder payouts falling just 3.9% in the third quarter. Around 80% of US companies held or increased their payouts, deciding instead to launch smaller share buy-backs to help preserve cash.
In China, where the third quarter usually results in the highest payouts, dividends were 3.3% higher than a year earlier. Three quarters of Chinese firms either increased dividends or maintained dividend levels. Hong Kong and Canada were also among the few countries to see dividends rise.
Janus Henderson is now predicting flat dividend growth on an underlying basis in 2021, but shareholder payouts could jump by 12% according to its most optimistic forecasts.