Wells Fargo, Boeing, Walt Disney, Occidental
Petroleum and Marriott accounted for half of the US dividend cuts
by value in Q1
- Dividends fell far less in US during COVID-19 lockdowns than in
most other parts of the world. The median dividend increase among
US companies was 4% in Q1
- US dividends expected to show growth this year amid economic
rebound
- Globally, Janus Henderson forecasts a 7.3% increase in dividend
payments in 2021.
One year after the anniversary of the start of global COVID-19
lockdowns, US dividend payments remained resilient, dropping just
0.4% to $127.4 billion in the first quarter of 2021. Globally,
dividends were just 1.7% lower than the same period last year, a
far more modest decline than in any of the preceding three
quarters, all of which saw double-digit falls. Janus Henderson’s
index of dividends ended the quarter at 171.3, its lowest level
since 2017, but growth is now likely.
For the full year 2021, the stronger first quarter along with a
better outlook for the rest of the year have enabled Janus
Henderson to upgrade its expectations for global dividends. The new
central-case forecast is $1.36 trillion, up 8.4% year-on-year on a
headline basis, equivalent to an underlying rise of 7.3%. This
compares to January’s best-case forecast of $1.32 trillion.
Over the four pandemic quarters to-date, companies cut dividends
worth $247bn, equivalent to a 14% year-on-year reduction, wiping
out almost four years’ worth of growth. Even so, this was a milder
fall than after the global financial crisis and the sector patterns
were consistent with a conventional, if severe, recession.
Q1 2021 - Dividend recovery mixed across markets
Globally, just one company in five (18%) cut its dividend
year-on-year in the first quarter, well below the one third (34%)
over the last year overall.
North America: The first quarter is seasonally skewed to
North America, which has seen dividends fall far less than other
parts of the world. US payouts of $139.3bn were 8.1% lower
year-on-year on a headline basis, though the decline was due almost
entirely to unusually large US special dividends last year not
being repeated. On an underlying basis, the 0.3% fall in North
American dividends was better than the global average of -1.7%. In
the US, one company in ten cut its dividend, with the biggest
negative impact coming from Wells Fargo, the only large bank in the
US to succumb to a dividend cut. The mix of companies cutting
against those increasing shows the clear influence of the pandemic.
By value, Wells Fargo, Boeing, Walt Disney, Occidental Petroleum
and Marriott accounted for half of the US cuts in Q1. Meanwhile,
eight of the top twenty largest increases by value came from the US
healthcare sector, many of them showing double-digit growth in
percentage terms.
Europe (ex UK): Q1 is usually relatively quiet for
European dividends but this year there are positive signs ahead of
the seasonally important second quarter. Payouts in Europe (ex-UK)
rose year-on-year, up 10.8% on a headline basis to $42.5bn, boosted
by catch-up payments from Scandinavian banks. Equally Switzerland
made a disproportionate contribution in Q1 and companies there have
also proven resilient. One third of European companies that usually
pay in the first quarter cut their dividends year-on-year, but this
compares to just over half in the previous three quarters.
UK: The first quarter saw lower UK dividends than a year
ago, down 26.7% on an underlying basis as the UK continued to feel
the effects of the oil company cuts. However, less than half of
British companies in our index cut dividends in Q1, much better
than over the last year. There are also signs of a revival with the
headline total for UK dividends rising 8.1% in Q1 thanks to a
number of extra payouts and special dividends. Over the last twelve
months, 57% of UK companies in our index made cuts.
Asia-Pacific ex-Japan and Emerging Markets: Dividends
from Asia-Pacific ex-Japan were 6.0% lower on an underlying basis,
with the 16.9% fall in Hong Kong making a significant impact. This
meant our index of Asia-Pacific’s dividends fell to 190.6. Emerging
markets were boosted by dividend restorations in Brazil, India and
Malaysia.
Mining companies lead recovery, but consumer discretionary
and energy sectors suffer falls
Mining companies really stood out in the first quarter, as
resurgent commodity prices have driven significant growth in
payments boosted by large one-off special dividends. Mining
companies raised their dividends 85% on a headline basis (58% in
underlying terms) and have signalled more to come during the year.
Utilities and healthcare also saw higher payouts.
Dividends from financial companies in particular were boosted by
a number of companies restarting dividends, albeit generally at
lower levels, that had been interrupted by the pandemic, in many
cases owing to regulatory restrictions. This provided an unseasonal
boost to the sector in Q1 that we expect to see continue in the
months ahead.
Consumer discretionary sectors (encompassing general retail,
consumer durables, vehicles, and travel) that are directly impacted
by continuing lockdown restrictions saw the biggest drop – down 36%
on an underlying basis in Q1 – with energy stocks close behind at
-26%. Unusually, technology dividends fell, down 1.5% on an
underlying basis.
Matt Peron, Director of Research at Janus Henderson said:
“With a scarcity of yield across the world, the resilience of US
dividend payments during COVID-19 lockdowns was a bright spot for
income investors during the last twelve months. Looking ahead,
dividend payments in the US are poised to accelerate through the
end of 2021, as the re-opening of the economy is expected to lift
cashflows and improve balance sheets. However, share buybacks,
which are also returning at record levels, may influence how much
capital is returned to shareholders via dividends as some companies
may choose to restore buybacks before increasing dividends.”
Unless otherwise stated all data is sourced by Janus Henderson
Investors as of 31 March 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 31 March 2021, Janus Henderson had approximately US$405
billion in assets under management, more than 2,000 employees, and
offices in 25 cities worldwide. Headquartered in London, the
company is listed on the New York Stock Exchange (NYSE) and the
Australian Securities Exchange (ASX).
Methodology
Each year Janus Henderson analyse dividends paid by the 1,200
largest firms by market capitalisation (as at 31/12 before the
start of each year). Dividends are included in the model on the
date they are paid. Dividends are calculated gross, using the share
count prevailing on the pay date (this is an approximation because
companies in practice fix the exchange rate a little before the pay
date), and converted to US$ 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.
C-0521-38101 05-15-22
This press release is solely for the use of members of the
media and should not be relied upon by personal investors,
financial advisers or institutional investors. We may record
telephone calls for our mutual protection, to improve customer
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