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(Bloomberg) – Global companies have so much liquidity that they are rushing to pay dividends, according to a global study by Janus Henderson Investors.
Payments are expected to hit $ 1.39 trillion this year, the second-highest total on record, the income fund managers led by Ben Lofthouse wrote. Janus said dividends are likely to peak before the pandemic within 12 months.
“The corporate world is full of liquidity and the financial system is robust,” said Jane Shoemake, client portfolio manager.
The fund manager said the pandemic caused less damage to company profits than they expected. Companies are able to increase dividend payments as they have adapted to the difficulties of the pandemic and have been supported by open credit markets and government assistance programs, according to Janus.
The road to recovery promises to be uneven. Mining companies, one of the biggest payers of dividends, are also benefiting from the resurgence in commodity prices. Half of the payments restored in Europe came from banks, Janus said.
“Companies have used their financial flexibility to strengthen their balance sheets,” Janus said. “It has given them substantial financial firepower as the world recovers. “
In another note released on Monday, JPMorgan strategists led by Mislav Matejka pointed out that dividend estimates for miners have more than doubled this year, with major increases also for banks and automakers. Yet expectations for defensive industries such as healthcare and utilities have actually declined.
“Playing dividends shouldn’t be viewed as defensive trading,” they wrote.
(Updates with JPMorgan comments in the seventh and eighth paragraphs.)
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