Shareholder payments to reach $ 1.4 trillion in 2021, approaching pre-pandemic levels

According to a new report by UK asset manager Janus Henderson, the company’s payments to shareholders are expected to hit $ 1.39 trillion in 2021, just 3% below their pre-pandemic peak.

Second-quarter dividend payments jumped 26% from the same period last year to $ 471.7 billion, just 6.8% below levels seen in the second quarter of 2019. Janus Henderson predicted that dividend payments will return to pre-pandemic highs over the next 12 months.

The study, released Monday, said 84% of companies globally increased or maintained their dividends compared to the same quarter in 2020.

Much of the growth has been attributed to the restart of frozen payments and the issuance of higher special dividends thanks to strong earnings. Underlying dividend growth in the second quarter, excluding the effects of special dividends and currency exchange rates, was 11.2%.

Samsung overtook Nestlé as the world’s biggest dividend payer, with Rio Tinto, Sberbank and Sanofi also in the top five.

Samsung has distributed a total of $ 12.2 billion to investors once its regular dividend is included, and Janus Henderson predicts it will likely be among the top five payers in the world throughout 2021.

“The rebound has been so much stronger than expected, and I think it’s very encouraging to see these companies feeling strong enough to return money to shareholders,” Jane Shoemake, Client Portfolio Manager for Equity Income worlds at Janus Henderson, CNBC told CNBC on Monday.

Geographic divergence

Payments in the UK jumped 60.9% and Europe by 66.4%, while most dividend cuts were in emerging markets, the report said, reflecting the delayed impact of the decline of reported profits in 2020. He said dividend cuts in developed markets were “pre-emptive and preventive.”

North America, meanwhile, posted record second quarter dividends, driven by Canada. However, payments in the region had largely held steady until 2020, meaning there was little rebound effect.

In Asia-Pacific excluding Japan, overall dividend growth was 45% per year in the second quarter, supported by Samsung’s unique special dividend, with South Korea and Australia leading growth in the region. However, Singapore remained limited by restrictions on bank payments.

Japanese dividend payments also remained robust in 2020, but still managed to manage underlying 11.9% year-on-year growth.

In emerging markets, however, dividends fell 3.2% per year on an underlying basis, driven by declining 2020 earnings, while only 56% of emerging market companies increased or maintained their dividends. in the second trimester.

Portfolio implications

Mining companies posted the fastest growth thanks to soaring commodity prices, while industrial and consumer discretionary companies also rebounded strongly, the Janus Henderson study showed. The so-called defensive sectors, such as telecoms, food and household products, maintained their growth rate at characteristically constant figures.

“Looking at the highest yielding sectors, the dividend outlook for the financials and commodities sectors is the most improved since last year,” said Ben Lofthouse, head of global equity income at Janus Henderson.

The company has strengthened its positions in these sectors in its equity allocations over the past 12 months to take advantage of this rebound. Many banks and financial services companies have been subject to regulatory restrictions on dividend payments during the pandemic, which is now starting to lift.

“The travel and leisure sectors remain the hardest hit in terms of the impact of Covid, and although many have adjusted their operations to be able to survive, the sector is unlikely to pay dividends until balance sheets recover. not, so we continue to avoid them for the time being, ”Lofthouse added.