US Stock Dividends Dropped 3.9% While Global Dividends Fell 11% in Q3
November 23 2020 - 9:17AM
Business Wire
- US dividends fell $6.7bn to $117.7bn in the third quarter
- One in six US companies cut or cancelled dividends during the
quarter
- JHGDI fell to 176.0 a level last seen almost three years ago,
as signs grow the worst is over for income investors
As the pandemic continues to reshape the economic landscape, its
impact on the dividend-paying capacity of the world’s companies has
become clearer. According to the latest edition of the Janus
Henderson Global Dividend Index, US dividends have proven to be
resilient amid recent economic headwinds. However, after remaining
unchanged in Q2, the US picture deteriorated in Q3, as dividend
payments fell 5.4% on a headline basis to $117.7bn, equivalent to a
3.9% underlying decline. During the quarter, one in six US
companies cancelled their dividends.
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Globally, total dividend payouts made by the world’s largest
1,200 firms fell by $55bn to $329.8bn in the third quarter, their
lowest level since 2016. The 14.3% headline decline was equivalent
to a fall of 11.4% on an underlying basis, far better than Q2’s
18.3%1 decline.
Matt Peron, Director of Research at Janus Henderson said:
“Despite falling in the third quarter, US stock dividends have
remained firm in the face of a global pandemic thanks in large part
to share buy-backs, which have been trimmed to preserve cash. The
fourth quarter will be critical for income investors, as many US
companies are determining their 2021 dividends. We expect payouts
in the US and worldwide to grow again next year, particularly after
we get past Q1 2021.”
In April, in the midst of the greatest pandemic-induced
uncertainty, Janus Henderson calculated that global dividends could
fall at least 15% this year, but by as much as 35% on an underlying
basis. In July the team narrowed this range to -19% to -25%. Janus
Henderson is now confident that the final figure will come in
towards the top end of our expectations. The best case now sees a
fall of -17.5% to $1.20 trillion on an underlying basis, equivalent
to a headline drop of -15.7%. Our worst case sees underlying
dividends declining -20.2% to $1.16 trillion, a headline drop of
-18.5%. The best case would eradicate more than three years of
dividend growth, costing investors $224bn in lost income this
year.
Additional Highlights From The Janus
Henderson Global Dividend Index
- Globally, the worst dividend declines in Q3 came from consumer
discretionary companies, down 43% in underlying terms, with car
manufacturers and leisure companies making the deepest cuts. Media,
aerospace and banks were also severely impacted. The most resilient
sectors were classically defensive pharmaceuticals, food producers
and food retailers, which all saw higher payouts on an underlying
basis.
- Q3 is China’s big dividend season and payouts there were 3.3%
higher year-on-year. Three quarters of Chinese companies raised
payouts or held them steady. Canada and Hong Kong were among the
few major countries to see dividends rise too. The weakest results
came from the UK, Australia, and the Netherlands.
- Australian dividends have been among the hardest hit in the
world. They fell 40.3% on an underlying basis, down to just $9.6bn,
the lowest third-quarter total in at least 11 years, with cuts from
the banks making a particularly large impact. UK payouts were 41.6%
lower, while the cancellation of banking and brewing dividends
impacted the Netherlands severely.
- Excluding Australia, dividends from Asia-Pacific ex Japan were
exactly flat year-on-year, reflecting the milder impact of the
pandemic both on the population and on the economy, stronger
balance sheets, lower payout ratios and because many of this
quarter’s payouts relate to 2019 earnings and were fixed several
months ago. Hong Kong enjoyed the fastest dividend growth in the
developed world in Q3, with payouts rising 9.9% on an underlying
basis to $21.7bn, the second highest quarterly total on record from
the territory.
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.
As of September 30, 2020, Janus Henderson had approximately
US$358 billion in assets under management, more than 2,000
employees, and offices in 27 cities worldwide. Headquartered in
London, the company is listed on the New York Exchange (NYSE) and
the Australian Securities Exchange (ASX).
Methodology
Each year Janus Henderson analyse dividends paid by the 1,200
largest firms by market capitalisation (as at 31/12 before the
start of each year). Dividends are included in the model on the
date they are paid. Dividends are calculated gross, using the share
count prevailing on the pay date (this is an approximation because
companies in practice fix the exchange rate a little before the pay
date), and converted to US$ 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.
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
service and for regulatory record keeping purposes.
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Limited (incorporated and registered in England and Wales,
registered no. 1471624, registered office 201 Bishopsgate, London
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_________________________ 1 Revised upwards from -19.1% - see
report for more details
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Sarah Johnson T: 720-364-0708 E:
sarah.johnson@janushenderson.com
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