Daily Management Review

2021 Could See Revival Of Global Dividend Payouts – Says A New Study


2021 Could See Revival Of Global Dividend Payouts – Says A New Study
According to a new report, there could be as much as a 5 per cent rebound this year in the global dividend payments. This was good news for investors since the biggest slump in dividend payouts since the financial crisis more than a decade ago had been witnessed last year because of the novel coronavirus pandemic.
In 2020., there was a drop of more than  10 per cent on an underlying basis in payouts by companies to shareholders with one in five companies slashing dividends while dividends were cancelled by one in eight companies.
Calculations based on investment manager Janus Henderson's Global Dividend Index show that between April and December, a total of $220 billion worth of cuts were made. But signals that at least some of them are being reinstated by companies can be seen now.
Despite this there can be a drop of 2 per cent this year in dividends in a worst case scenario, warned the Janus Henderson's report. However a growth in dividends by 5 per cent on a headline basis was predicted as a best-case scenario for 2021.
"It is quite likely we will see companies pay special dividends in 2021, utilising strong cash positions to make up some of the decline in distributions in 2020".
The report said that the rebound in payouts in 2021 will likely be led by banking dividends. This was because of the easing of the blanket bans for lenders on dividends and buybacks by the European Central Bank and Bank of England earlier. The bans were imposed during the first wave of the pandemic crisis so that the banks could get themselves ready for a potential increase in bad loans.
Earlier this month, dividend payouts were restarted by UK lenders Barclays and NatWest.
According to the report banks cut or cancelled $70 billion of payments globally because of the dividend bans.
However there was a less dramatic reduction in the overall global dividend cuts.
According to estimates of Janus Henderson in August, corporates would have been driven to cut dividends by as much as $400 billion globally because of the pandemic – which was almost double of the actual on the ground cuts to dividends by the corporate. 
Janus Henderson said that this was because of a resilient fourth quarter of 2020. Dividend payments were restored in the quarter by companies like the German car maker Volkswagen and Russia's largest lender Sberbank.
After a slump in commodity prices, dividends were also cut by mining and oil companies while such measures were also employed by consumer discretionary companies because of Covid-19 induced lockdowns.
There was a drop of 28.4 per cent on an underlying basis in dividends payout in Europe, excluding Britain, at $171.6 billion in 2020. "This was the lowest total from Europe since at least 2009," Janus Henderson said.
The report however said that there was a 2.6 per cent rise in the dividend payouts by North American companies for the entire of 2020 as the corporates there set a new record of $549 billion. The index also showed that the fewest dividend cuts anywhere in the world was imposed in Canada.