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Global dividend payments fell to their lowest level in more than a decade, as companies rallied to protect their balance sheets amid the pandemic, dealing a blow to investors who rely on payments to grow their returns. wealth.
Total payments to shareholders fell $ 108 billion to $ 382 billion, the lowest second-quarter total since 2012, according to Janus Henderson’s Global Payments Index, released on Monday.
The 22% drop is the worst since the asset manager launched the index in 2009.
In the best-case scenario, Janus Henderson now expects global dividends to fall 19% on an underlying basis this year, shedding $ 1.18 trillion. The worst-case scenario could see payments drop 25%, paying off $ 1.10 trillion.
“Despite the cuts seen so far, we still expect global dividends to exceed $ 1 trillion this year and next,” said Jane Shoemake, chief investment officer, global equity income at Janus Henderson.
Nestlé NESN,
Rio Tinto RIO,
and China Mobile 941,
were the top three contributors of dividends, according to the report, while Microsoft MSFT,
was the sixth payer, followed by AT&T T,
in seventh place.
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Dividends fell in all regions of the world except North America, thanks in part to the resilience of Canadian companies, where dividends rose 4.1%. This makes Canada one of only two major countries to see its payments increase.
Only 10% of US companies have cut their payments, with the “vast majority” choosing instead to suspend share buybacks, which totaled $ 700 billion in 2019, according to Goldman Sachs estimates.
Top names in the United States that cut payments included Boeing BA,
General Motors GM,
Halliburton HAL,
and Walt Disney DIS,
The report noted that U.S. companies set their dividends once a year and pay them in four equal installments starting in the fourth quarter, which means investors are more likely to see the impact of the pandemic on payouts towards the end of the year.
The regions most affected were Europe and the UK, which saw declines of 45% and 54% respectively on an underlying basis.
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Shoemake said most European companies pay only once a year in the second quarter, so a dividend cancellation disproportionately impacts the annual total, but it also means 2021 is expected to show a rebound in Europe. . “For the UK, the rebound will be weaker as several companies, including oil giants Shell and BP, took the opportunity to reset their payments to a lower level,” she said.
In April, Royal Dutch Shell RDSA,
lost its crown as the world’s largest dividend payer by reducing the payment for the first time since WWII, while in August BP BP,
halved its dividend after the major oil company posted a loss of $ 16.8 billion in the second quarter.
However, several UK companies have announced in recent weeks their intention to restore dividends. Monday, Bunzl BNZL,
The FTSE 100-listed distribution group has said it will recalculate its previously suspended final dividend following better-than-expected trading performance in the first half of the year.
France, Europe’s largest dividend-payer, has seen total dividends reach their lowest level in at least a decade, although some of the lost French income will be restored later in 2020, Janus said. Henderson.
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Almost half of dividend cuts in Europe came from the banking sector, with regulatory pressure from the Bank of England to free up capital during the coronavirus crisis having seen HSBC HSBC,
Standard chartered STAN,
Barclays BCS,
and Lloyds Banking Group LLOY,
all canceling their payments.
In July, the European Central Bank said lenders should refrain from paying dividends and buying back shares until January 2021, to help banks absorb losses during the pandemic.
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