Global dividends are calculated to have fallen during 2020 at a headline rate of 15.7% in a best-case scenario and by 18.5% in a worst-case scenario, according to Janus Henderson’s Global Dividend Index.
- Yields fell during 2020
- Banks were given permission to resume dividends, but urged to exercise caution
- UK equity funds remained out of favour
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Global dividends are calculated to have fallen during 2020 at a headline rate of 15.7% in a best-case scenario and by 18.5% in a worst-case scenario, according to Janus Henderson’s Global Dividend Index. There is a clear divergence in different areas of the world: the UK, Europe, and Australia were particularly hard-hit; emerging markets and North America proved relatively resilient; Japan lay somewhere in the middle. Looking ahead, the first quarter of 2021 is still likely to be affected by dividend cuts, but payments are expected to pick up from the second quarter. On a worst-case scenario, global dividends are predicted to be flat during 2021, whereas a best-case forecast suggests a 12% rebound.
“The PRA announced that banks will be permitted to restart dividend payments”
Yields fell over December and over 2020 as a whole. The yield on the FTSE 100 Index declined from 3.88% to 3.70% during the month, having started the year at 4.36%. The FTSE 250 Index’s yield fell from 2.86% to 2.32% over December, having begun 2020 at 2.95%. In comparison, the yield on the benchmark UK gilt dropped from 0.31% to 0.20% during December, compared with 0.76% twelve months earlier.
In its latest Financial Stability Report, the Bank of England (BoE) confirmed that UK banks have high levels of capital that would allow them to “absorb very big losses while continuing to lend”. The Prudential Regulation Authority (PRA) announced that banks will be permitted to restart dividend payments, which were stopped in March as a precautionary measure as the coronavirus pandemic took hold. Nevertheless, the PRA warned that “any distributions should be prudent, reflecting the still elevated levels of economic uncertainty and the need for banks to continue to support households and businesses”. The PRA also urged banks to “exercise a high degree of caution and prudence” towards cash bonuses.
The FTSE 100 Index rose by 3.1% during December but fell by 14.3% over 2020. Meanwhile, the FTSE 250 Index climbed by 6% over the month, but dropped by 6.4% over the year.
Net retail sales of funds hit a record level of £8.3 billion during November, half of which went into equity funds, according to the Investment Association (IA). However, the UK remained out of favour: while demand for funds invested in global, Asian, and North American equities was particularly strong, UK funds experienced net retail outflows of £461 million.
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