Dividends in the UK and Europe bounced back from pandemic-related lows much stronger than those in Japan and North America in the second quarter, according to Janus Henderson data.
The asset manager’s latest global dividend index found on a headline basis, which includes one-off payments, UK dividends increased 60.9% from the previous year, while in Europe they were 66.4% higher. This compared with growth of just 0.4% in Japan and 5% in North America.
In Europe, half the headline growth was driven by companies returning to their normal dividend schedule. France and Spain led the rebound, but Switzerland lagged, the asset manager said.
Elsewhere, Asia-Pacific ex Japan saw headline growth of 45% aided by Samsung Electronics’s one-off special dividend. Underlying growth for the region was 13%.
In emerging markets, dividends were down 3.2% year-on-year, as cuts reflected lower 2020 profits retrospectively. Just 56% of EM companies raised or held their dividends in Q2.
Janus Henderson said the wide disparities in payouts reflected “the extent, the timing and the depth “of cuts made in 2020 as the pandemic hit markets.
Overall, however, on a headline basis global dividends jumped 26% higher in Q2 2021 compared with Q2 2020. This represented $471.7bn of payouts which was only 6.8% below the Q2 2019 level. On an underlying basis, Q2 dividend growth was 11.2%.
Mining bounces back while leisure struggles
It said mining dividends grew fastest on the back of booming commodity prices, while industrials and consumer discretionary payouts also came back strongly, but some sub-sectors like leisure remained under pressure.
Defensive sectors including telecom, food, food retail, household products, tobacco and pharmaceuticals registered “characteristically” low single-digit growth rates, having seen little negative impact in 2020.
Janus Henderson said banks accounted for half the fall in global dividends last year, but constraints are being lifted and have been removed completely in the UK. However, the asset manager thinks banks are likely to use some of their surplus capital to buy back their lowly valued shares as well as increase dividend payments.
Back to pre-pandemic levels within 12 months
It has predicted dividend payouts will return to pre-pandemic highs in the next 12 months. It has upgraded its 2021 forecast from $1.36trn to $1.39trn which is just 3% below the pre-pandemic peak.
Janus Henderson global equity income team client portfolio manager Jane Shoemake (pictured) said: “Just as the impact of the pandemic on company dividends has been consistent with a conventional but severe recession, so the recovery is also consistent with the rapid economic bounce-back now occurring in those parts of the world where vaccination programmes are enabling economies to reopen. Households have record savings and there is pent-up demand to spend which should be good for company profits.
“Across the world, the restart of cancelled dividends has driven the recovery so far, but we are also seeing stronger dividend growth than we expected. Despite the severity of the recession last year, global dividends in aggregate will likely regain their pre-pandemic levels within the next 12 months.”
