Dividend payments in US higher
year-over-year in every sector except banking and energy
Globally, dividends increased 11.2% on an
underlying basis; expected to regain pre-pandemic highs in next 12
months
- Over nine in ten US companies (92%) increased their dividends
or held them steady year-over-year in Q2.
- Globally, 84% of companies increased their dividends or held
them steady compared to Q2 2020.
- Janus Henderson upgrades its 2021 dividend forecast to $1.39
trillion from $1.36 trillion; this new forecast is just 3% below
the pre-pandemic peak.
Despite some notable exceptions, the majority of US companies
continued paying their dividends without interruption during the
first year of the pandemic, leading to a smaller rebound in the
second quarter of 2021 relative to other countries. US dividends
rose 5.2% during the quarter on an underlying basis according to
the latest edition of the Janus Henderson Global Dividend Index.
Nine US companies in ten (92%) increased their dividends
year-on-year or held them steady, with payouts higher in every
sector except banks and energy.
In percentage terms, the fastest US dividend growth came from
the mining sector, in line with trends in other parts of the world,
but the biggest contribution came from healthcare and
pharmaceuticals companies.
Globally, the dividend recovery began in earnest in the second
quarter of 2021, as payments increased 11.2% year-over-year on an
underlying basis. Janus Henderson Investors predicts global
dividend payments will return to pre-pandemic highs in the next 12
months.
Companies cutting payments were most likely to be in emerging
markets and reflected the delayed impact from lower reported 2020
profits. Early in 2020, many of the dividend cuts witnessed in
developed markets were by contrast pre-emptive and
precautionary.
Upgraded Forecast
For 2021, Janus Henderson is upgrading its forecast to $1.39
trillion, an increase of 2.2 percentage points since the May
edition. This results in headline dividend growth of 10.7% and will
take the total paid within 3% of the pre-pandemic 2019 level,
though this is boosted by dollar weakness and higher special
dividends. Underlying growth is set to be 8.5% for 2021.
Matt Peron, Director of Research at Janus Henderson said:
“The pandemic’s impact on global dividend payments was severe but
relatively short-lived. With companies currently holding record
levels of cash on their balance sheets, the outlook for future
dividend growth is promising, which is much-needed good news for
income investors across the globe.”
Second Quarter of 2021 sees significant payout divergence
across markets
There has been enormous divergence across markets. Payouts were
up 66.4% in Europe and 60.9% in the UK, but just 0.4% in Japan and
5.0% in North America. The wide disparities reflect the extent, the
timing and the depth of cuts made in 2020 in the face of the
pandemic.
UK: UK dividends bounced back strongly in the second
quarter, jumping by more than three fifths (60.9%), closely in line
with the rest of Europe, having experienced a similar fall this
time last year. Underlying growth was 42.2%. But the total was
still 27% lower than Q2 2019.
Europe ex-UK: Q2 is the main European dividend season.
Half the headline growth of 66.4% was driven by companies returning
to their normal dividend timetable. Underlying growth of 20.1% was
almost entirely driven by cancelled payouts restarting, though
mostly at lower levels than pre-pandemic. France and Spain led the
rebound, but Switzerland lagged behind – reversing the 2020
picture. The regional total remained a fifth lower than Q2
2019.
Asia-Pacific-ex Japan: Headline growth of 45% was boosted
by Samsung Electronics’s one-off special dividend. Underlying
growth was 13%. South Korea and Australia led growth in the region,
but Singapore’s dividends were depressed by ongoing restrictions on
banking payouts. Hong Kong dividends were resilient in 2020 so had
little room to rebound.
Japan: Having seen so little downside in 2020, underlying
growth of 11.9% was strong. More than eight in ten Japanese
companies raised their dividends year-on-year or held them
steady.
Emerging Markets: On an underlying basis, dividends were
down 3.2% year-on-year, as cuts reflect lower 2020 profits
retrospectively. Just 56% of emerging market companies raised or
held their dividends in Q2.
Implications for portfolio allocations
Dividends from mining companies grew fastest as they are
benefiting from booming commodity prices. Industrials and consumer
discretionary dividends came back strongly too, though some
sub-sectors like leisure remain under severe pressure. Defensive
sectors, like telecoms, food, food retail, household products,
tobacco and pharmaceuticals registered their characteristic low
single-digit growth rates, having seen little negative impact in
2020.
Limits on bank dividends had a major impact in 2020 – banks
accounted for half of the fall in global dividends last year.
Constraints on banking dividends where they have been imposed are
lifting. In the UK they have been removed entirely, though banks
are likely to use some of their surplus capital to buy back their
lowly valued shares as well as increase dividend payments.
How Janus Henderson’s fund managers are positioning the
global income portfolios:
Ben Lofthouse, Head of Global Equity Income at Janus
Henderson, added: “As the global economy rebounds, the broad
recovery in dividends makes it possible for investors once again to
have a wide spread of sectors that are generating income,
diversifying the risk of stock and sector specific issues. This is
the approach our funds are following. In terms of the highest
yielding sectors, the financial services and commodity sectors
dividend outlooks are the most improved since last year. We took
selective advantage of opportunities to add to positions in these
sectors over the last 12 months in anticipation if this
improvement. The travel and leisure sectors remain hardest hit in
terms of the Covid impact, and while many have adjusted operations
to be able to survive, the sector is unlikely to be paying
dividends until balance sheets recover, so we continue to avoid
these for the time being.”
Unless otherwise stated all data is sourced by Janus Henderson
Investors as of 30 June 2021. Past performance is no guarantee of
future results. International investing involves certain risks and
increased volatility not associated with investing solely in the
UK. These risks included currency fluctuations, economic or
financial instability, lack of timely or reliable financial
information or unfavourable political or legal developments.
Notes to editors
Janus Henderson Group (JHG) is a leading global active asset
manager dedicated to helping investors achieve long-term financial
goals through a broad range of investment solutions, including
equities, fixed income, quantitative equities, multi-asset and
alternative asset class strategies.
At 30 June 2021, Janus Henderson had approximately US$428
billion in assets under management, more than 2,000 employees, and
offices in 25 cities worldwide. Headquartered in London, the
company is listed on the New York Stock Exchange (NYSE) and the
Australian Securities Exchange (ASX).
Methodology
Each year Janus Henderson analyse dividends paid by the 1,200
largest firms by market capitalisation (as at 31/12 before the
start of each year). Dividends are included in the model on the
date they are paid. Dividends are calculated gross, using the share
count prevailing on the pay date (this is an approximation because
companies in practice fix the exchange rate a little before the pay
date), and converted to US$ using the prevailing exchange rate.
Where a scrip dividend is offered, investors are assumed to opt
100% for cash. This will slightly overstate the cash paid out, but
we believe this is the most proactive approach to treat scrip
dividends. In most markets it makes no material difference, though
in some, particularly European markets, the effect is greater.
Spain is a particular case in point. The model takes no account of
free floats since it is aiming to capture the dividend paying
capacity of the world’s largest listed companies, without regard
for their shareholder base. We have estimated dividends for stocks
outside the top 1,200 using the average value of these payments
compared to the large cap dividends over the five-year period
(sourced from quoted yield data). This means they are estimated at
a fixed proportion of 12.7% of total global dividends from the top
1,200, and therefore in our model grow at the same rate. This means
we do not need to make unsubstantiated assumptions about the rate
of growth of these smaller company dividends. All raw data was
provided by Exchange Data International with analysis conducted by
Janus Henderson Investors.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210823005177/en/
Sarah Johnson Director, Media Relations & Corp Comms
T: (720) 364 0708 E: sarah.johnson@janushenderson.com
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