After-effects of the coronavirus pandemic, combined with regulatory pressure, mean investor payouts are suffering.
Global dividend payouts slumped 22% to $382.2 billion (£290.97 billion) in Q2, making it the worst period for the payments since the financial crisis of 2009.
Europe and the UK were worst affected, having a high count of financial services and consumer discretionary firms which took among the biggest hits from Covid-19.
UK payouts dropped 54%, behind only France and Spain among the world’s larger stock markets, according to research from Janus Henderson.
This was partly due to the actions of financial services and oil firms cutting their dividends, along with travel/leisure companies and airlines.
Many of the UK dividend cuts were caused by regulatory decisions and companies underperforming due to the financial impact of the coronavirus pandemic.
- Dividend drought: how severe will UK equity income payout cuts be?
- Income pledges of 11 investment trust ‘dividend heroes’ revealed
The UK’s underlying decline of 41% was line with the rest of Europe – 45%.
Ben Lofthouse, head of global Equity at Janus Henderson, says:
“Half of the decline in Europe is banks. HSBC (LSE:HSBA), Lloyds Banking Group (LSE:LLOY), BNP Paribas (EURONEXT:BNP), Credit Agricole (EURONEXT:ACA), Santander (LSE:BNC), BBVA (XMAD:BBVA) -- they’ve all had successful banks that have gone global and the regulators said you can’t pay dividends.”
Payouts were down in every region bar North America, where Canadian stocks held up.
Globally, Janus Henderson says dividends will fall at least 19% in 2020 on an underlying basis.
The worst-case scenario is a drop of 25% underlying, or 23% on a headline basis, with payouts at $1.1 trillion.
- The AIM stocks still paying – and growing – dividends
- Take control of your retirement planning with our award-winning, low-cost Self-Invested Personal Pension (SIPP)
Link Group, which produces a UK index, estimates a best-case drop of 39% to £60.5 billion on an underlying basis for UK stocks in 2020.
On a headline basis, the best case was a decline of 45% to £61.6 billion.
For the worst case, it was down 43% to £56.3 billion underlying, and lower by 49% on a headline basis.
Susan Ring, chief executive, corporate markets, at Link Group, says:
“Truly, the second quarter was a record breaker by a mile. The whole of 2020 will undoubtedly see the biggest hit to dividends in generations.”
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.