Equity Income  

Global dividends to reach pre-pandemic levels 'within 12 months'

Global dividends to reach pre-pandemic levels 'within 12 months'

UK dividends rose 61 per cent in the second quarter of the year, but their recovery is still lagging behind the global trend which is nearing-2019 levels.

Janus Henderson’s latest global dividend index, out today (August 23), showed UK dividends rose sharply in Q2 but were still 27 per cent below their Q2 2019 levels.

But while global shareholder payouts in the second quarter of the year rose by a comparatively smaller 26 per cent, to $472bn (£345bn), they ended the period a mere 7 per cent below those in the second quarter of 2019.

North American firms saw record dividends of $141bn (103bn) in the period, however as dividends held up throughout 2020 there has been little rebound effect. A similar picture was seen in Japan, which saw 0.4 per cent dividend growth in the second quarter, after little downside in 2020.

European firms (excluding those in the UK), on the other hand, saw a big rebound at a rise of 66 per cent to $131 (£96bn). But the regional total remained a fifth lower than Q2 2019.

Janus Henderson said companies restarting cancelled payments totalled $33bn (£24bn) and contributed three quarters of the underlying surge globally.

The 45 per cent dividend growth seen in Asia Pacific excluding Japan was boosted by a special dividend by Samsung Electronica, with dividend growth also seen in South Korea and Australia.

Emerging markets meanwhile saw a 12.5 per cent rise in dividends, however just 56 per cent of EM firms raised or held their dividends in Q2, compared with 84 per cent globally.

Jane Shoemake, client portfolio manager, global equity income at Janus Henderson, said: “Just as the impact of the pandemic on company dividends has been consistent with a conventional but severe recession, so the recovery is also consistent with the rapid economic bounce-back now occurring in those parts of the world where vaccination programmes are enabling economies to reopen.

"Households have record savings and there is pent-up demand to spend which should be good for company profits."

Janus Henderson has upgraded its dividend forecast for 2021 by 2.2 per cent to $1.39tn (£1tn). This translates into headline growth of 10.7 per cent and will take the total paid to within 3 per cent of the pre-pandemic dividend level.

Shoemake added: “The corporate world is awash with liquidity and the financial system is robust. The banks generally hold surplus capital, and policymakers continue to provide fiscal and monetary support for economies, so this recovery will not be hampered by a weak banking system as it was after the global financial crisis a decade ago.

"What’s more, regulatory limits on bank dividends are now being lifted and this will make a significant contribution to the dividend recovery in the months ahead given they accounted for half the global decline in 2020.

“Across the world, the restart of cancelled dividends has driven the recovery so far, but we are also seeing stronger dividend growth than we expected. Despite the severity of the recession last year, global dividends in aggregate will likely regain their pre-pandemic levels within the next twelve months.”