Have global dividends been hit as hard as UK dividends? The Janus Henderson Global Dividend index shows some markets are yet to see an impact.
- Global dividends dropped 22% overall, the worst fall since the global financial crisis
- There were a number of markets where dividends barely dropped at all, notably the US
- Global dividends may fall 17% in a best-case scenario, or 23% in a worst case scenario
It has been a torrid time for those investors trying to draw an income from a UK equity portfolio. The solution generally offered is to look globally, but does this apply during a pandemic with many countries hit equally badly? The latest Janus Henderson Global Dividend index suggests that there have been places to hide during the recent dividend rout.
Although global dividends dropped 22% overall, the worst fall since the global financial crisis, there were a number of markets where dividends barely dropped at all. In general, this depended on the sector make-up of the market. In the US, for example, which is dominated by healthcare, technology and communications, only 10% of companies cut their dividends and payouts were flat overall.
However, in Europe, where financials, consumer discretionary and oil companies had a greater weight, falls were far worse. Dividends fell 45% on a headline basis, dropping by $66.9bn; 54% of European companies reduced their payouts, of which two-thirds cancelled outright. There was also some relationship with the progress of the virus and the response of individual countries. France, Spain, Italy and Sweden – whose economies were hit hard - saw the worst declines, while Germany and Switzerland held up relatively.
Asian companies generally held up well, though more of their pain was felt in the first quarter. Japan was a notable success story. A nascent dividend culture has been building in Japan and payouts fell just 4.2% to $37.7bn. Only four companies cancelled dividends altogether and generally where their businesses had come under significant pressure, such as Nissan Motor.
There is still a long road ahead in the Covid-19 crisis. Janus Henderson believes the greatest area of uncertainty is the outlook for North America in the fourth quarter when payments for the next four quarters are announced. In other markets, dividends are slowly starting to come back as companies get greater visibility on earnings.
Overall, the group expects headline global dividends to fall 17% in a best-case scenario, or 23% in a worst case scenario. This is the worst outcome for global dividends since the global financial crisis, but in aggregate falls have been far less than they have been for UK companies. It makes the case for investing globally for income.