Global dividends on track to reach pre-Covid levels

In good news for income investors, global dividends continued to rise in the second quarter of 2021, with analysts predicting that dividend payouts will return to pre-Covid levels within the next 12 months.

The latest Janus Henderson Global Dividend Index* says that dividends are recovering quickly for a number of reasons. First, the damage to company profits through the pandemic has been less severe than anticipated, with companies adapting quickly to minimise the impact of the crisis on their operations. Secondly, cash flow, which is necessary for the payment of dividends, fell less in aggregate than profits. Companies were also helped by accessible credit markets and various government support schemes.

Globally, more than eight in ten (84%) of companies increased their dividends or held them steady, quite similar to a normal period pre-pandemic*. There has, however, been an enormous divergence in the performance of dividends in different regions. Areas that saw dividend cuts and cancellations first are leading the recovery, while those where payouts proved resilient through the pandemic naturally have less of a decline to recover from.

Dividends by region


In the UK, dividends bounced back strongly in the second quarter, jumping by more than 60%*. Underlying growth was 42.2%, but the total was still 27% lower than Q2 2019*. The banks made the biggest contribution to growth, especially HSBC, which was prohibited from paying this time last year. Companies restarting dividends accounted for nine-tenths of the growth year-on-year. According to the Janus Henderson report, the bounceback would have been stronger still had it not been for BP, whose 50% dividend cut last year was not made until the third quarter of 2020 and so is still having an impact when comparing the Q2 payment made this year with last year.

UK Equity income funds on the Chelsea Core Selection: Man GLG Income, Montanaro UK Income and Rathbone Income


The second quarter is seasonally dominated by European companies as most make a single annual payment. The region experienced a similar jump to the UK, with dividends growing 66%*. France and Sweden saw the strongest rebound while Germany, Switzerland and Norway lagged behind. Underlying growth of 20% was almost entirely driven by cancelled payouts restarting, though mostly at lower levels than pre-pandemic*. The regional total remained a fifth lower than Q2 2019*.

European Equity Income funds on the Chelsea Core Selection: BlackRock Continental European Income


Companies in the USA and Canada for the most part continued paying their dividends without interruption during the first year of the pandemic, with the notable exception of especially exposed sectors like holiday resorts and aviation. A combination of less severe lockdowns, minimal government pressure, and the opportunity for companies to save cash in other ways, for example by reducing share buybacks, meant only one company in seven reduced its dividend. This means a significant rebound in payments is not to be expected and, In the second quarter, US dividends rose 5.2% on an underlying basis*. Nine companies in ten (92%) increased their dividends year-on-year or held them steady, with payouts higher in every sector except banks and energy*. In percentage terms, the fastest growth came from the mining sector, in line with trends in other parts of the world, but the biggest contribution came from healthcare and pharmaceuticals.

US Equity Income funds to consider: JPM US Equity Income

Asia ex Japan

In 2020, Singapore and Australia made the biggest contribution to dividend cuts from Asia Pacific ex Japan, mainly owing to regulatory limits imposed on banking payouts, while the rest of the region saw much smaller dividend cuts than the global average. This means there is less room for a rebound. Underlying growth in Q2 2021 was 13.0%*. In headline terms, the 45.0% jump year-on-year was in large part due to a huge special dividend from Samsung Electronics, which distributed a total of $12.2bn once its regular dividend was included*. Samsung is likely to be among the world’s top five payers for 2021. For Hong Kong, the region’s most resilient territory in 2020, dividends rose just 2.1% on an underlying basis*. Across the whole region, three quarters (76%) of companies raised dividends or held them steady, and the total paid was higher than the second quarter of 2019*.

Asian equity income funds on the Chelsea Selection: Fidelity Asian Dividend, Guinness Asian Equity Income and Schroder Asian Income


Japanese dividends proved to be very resilient through the first year of the pandemic as low payout ratios and healthy cash flow meant most companies continued to pay. So, having seen so little downside in 2020, Japan's underlying dividend growth of 11.9% was "strong"*. More than eight in ten Japanese companies raised their dividends year-on-year or held them steady*.

Japanese equity income funds to consider: Baillie Gifford Japanese Income Growth and Jupiter Japan Income

Emerging Markets

While companies in the UK, Europe and Australia cut dividends pre-emptively last year, the report cautioned at the time that the effect would be felt later in emerging markets, after 2020’s profits had been reported. The delayed effect of cuts meant that just 56% of emerging market companies raised or held their dividends in Q2*. On an underlying basis, dividends were down 3.2% year-on-year*.

Russian dividends were five times larger in Q2 2021 than in Q2 2020 but this reflected the timing switch of Sberbanks’s $5.5bn annual payout, its largest on record*. Elsewhere in Russia, the commodity boom helped push underlying dividends 72.5% higher*. Relatively few Chinese companies make payments in the second quarter, but all of them raised their dividends except Sinopec, the petrochemical group. By contrast, Petrobras in Brazil tripled its payout year-on-year*. Other countries did less well. The delayed impact of cuts was felt in Indonesia, Thailand and Malaysia, while in Saudi Arabia, companies cut dividends as part of a national plan to divert capital to domestic investment.

Emerging markets equity income funds to consider: Magna Emerging Markets Dividend 

Dividend recovery to continue

The report concluded: “Just as the impact of the pandemic on company dividends has been consistent with a conventional but severe recession, so too is the recovery 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 will be good for company profits. The financial system is robust: the banks generally hold surplus capital, and policymakers continue to provide fiscal and monetary support for economies, so this recovery will not be hampered by weak banks in the way it was after the global financial crisis over a decade ago too.”

*Source: Janus Henderson Global Dividend Index, Edition 31, August 2021

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed do not constitute financial advice.


Published on 27/08/2021