Dividends close to pre-pandemic levels, shows latest Janus Henderson report

As the Covid-19 recovery continues, global dividends are predicted to rise to $1.39 tn this year – a figure that is just 3 percent below the pre-pandemic peak.

That’s according to the latest Global Dividend Index from investment manager Janus Henderson, which shows strong ‘dividend recovery is under way’ in Q2 2021, with headline growth of 26.3 percent.

Underlying growth – adjusted for special dividends, changes in currency, timing effects and index changes – was 11.2 percent.

Last year companies across the world suspended dividend payments as the pandemic hit, with some sectors – such as banking in the UK and Europe – barred from making payouts to shareholders.

The research shows that dividends from companies that have restarted payments this year totaled $33.3 bn and accounted for three quarters of the underlying growth over Q2 2021.

Janus adds that 84 percent of companies either increased payments or held them steady.

‘Global dividends in aggregate will likely regain their pre-pandemic levels within the next 12 months,’ says Jane Shoemake, client portfolio manager on the global equity income team at Janus Henderson, in a statement.

The current ‘recovery will not be hampered by a weak banking system as it was after the global financial crisis a decade ago,’ she adds.

Some countries and sectors have seen more growth in dividends over the year, while others saw less of a bounce back. In some cases, companies had largely continued paying out dividends through the pandemic.

‘A combination of less severe lockdowns, minimal government pressure and the opportunity for companies to save cash in other ways – for example, by reducing share buybacks – meant only one company in seven reduced its dividend,’ note the report authors. This means that although a ‘significant rebound’ in dividends is not to be expected, the US still saw 5.2 percent growth on an underlying basis, with Janus now predicting an annual payout of $127.8 bn from US companies.

Noting that the past quarter is ‘Europe’s key dividend season’, Janus says payouts jumped 66.4 percent on a headline basis. Within the continent, France and Sweden saw the strongest rebound while Germany, Switzerland and Norway lagged behind, it adds.

In the UK, a strong bounce back – with headline growth of 60.9 percent – was driven largely by companies restarting payments after none were made in 2020. ‘The banks made the biggest contribution to growth, especially HSBC, which was prohibited from paying this time last year,’ notes Janus. ‘Companies restarting dividends accounted for nine-tenths of the growth yea on year. The bounce back would have been stronger still had it not been for BP, whose 50 percent dividend cut last year was not made until the third quarter of 2020 and so is still having an impact when comparing the Q2 payment made this year with last year.’

Despite the UK growth, Janus points out that its index – now in its 31st quarter – shows UK dividends to be growing slowly. ‘UK dividends have grown more slowly than [those in] any other region since 2009, with the Q2 total still 27 percent lower than in the same period of 2019,’ it says. ‘We expect the UK to catch up with its European neighbors in the third quarter, however, as mechanical timing effects are reversed.’

In Asia Pacific (excluding Japan), three quarters of companies increased or held their dividends. Australia was boosted by banking dividends and Korea by Samsung, notes the report. In Japan, where payouts had shown resilience during the pandemic, dividends rose ‘an impressive’ 11.9 percent.

In terms of sectors, mining proved strong as commodity prices boomed, with industrials and consumer discretionary coming back strongly. Payouts from these sectors contrast with single-digit growth from defensive sectors including telecoms, food, food retail, household products, tobacco and pharmaceuticals – though the biggest contribution to US dividends came from pharmaceuticals.