Interactive Investor

Dividends crash 22% in worst slump since 2009

24th August 2020 15:18

Liz Bury from interactive investor

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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.

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.

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.”

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