The Janus Henderson Global Dividend Index is a quarterly long-term study that analyses dividends paid by the 1,200 largest firms by market capitalisation. In this video, Investment Director Jane Shoemake explains that, despite the severity of the recession last year, global dividends appear on track to regain their pre-pandemic levels within the next 12 months.
Global dividends jumped 26.3% year-on-year, recovering to US$471.7 billion – just 6.8% below their Q2 2019 levels.
Companies restarting cancelled payouts contributed three quarters of the underlying surge.
Globally, more than eight in ten (84%) of companies increased their dividends or held them steady.
We have upgraded our 2021 forecast to US$1.39 trillion from US$1.36 trillion; this new forecast is just 3% below the pre-pandemic peak.
Jane Shoemake: Taking a global approach to income investing has several advantages for investors. Most importantly, it provides the benefits of diversification both by geography and by sector, and by reducing the concentration of dividends from just a handful of companies, which is a common problem in individual stock markets. This approach has proved its value through the pandemic as overall global dividends fell much less than in many individual countries. The anniversary of the big COVID-19 dividend cuts passed in April, so the second quarter of 2021 is the first to show how strong the recovery is going to be. And it's certainly strong.
Global dividends jumped 26 percent year on year in the second quarter of 2021, recovering to $472 billion U.S. dollars. This surge was caused largely by companies restarting cancelled payouts, which contributed three quarters of the underlying increase. Moreover, 84% of companies increased their divisions in the second quarter or held them steady compared to this time last year.
Our headline increase of 26% was flattered, both by special dividends and by companies restoring their dividends to their usual timetable. In the second quarter last year, lots of companies, especially in Europe and the UK delayed their payments until the third quarter or later. Dividends fell to a level last seen in 2011, but the rebound witnessed this year means they have made up a lot of the lost ground, with underlying growth over 11%.
The second quarter is Europe's key dividend season, and payouts jumped 66% on a headline basis, equivalent to an underlying increase of 20%. France and Sweden were amongst the strongest rebounders, while Germany, Switzerland and Norway were amongst those that lagged behind, mainly because payouts there fell less last year.
The UK's underlying growth of 42% was largely due to dividends being restarted, whilst in the US and Canada, dividends were resilient in 2020 so the bounce back there was smaller, although Canadian dividends still managed to rise to a new record high. In Asia Pacific, ex Japan, Australia was boosted by the return of banking dividends and Korea by Samsung. In fact, three quarters of the region's companies increased or held their dividends.
Japanese dividends rose an impressive 12%, despite the relative resilience they showed last year, while in emerging markets, many companies have cut dividends after their profits were impacted rather than pre-emptively. The second quarter was weaker in many countries.
If we look at the sector picture, mining companies led with an underlying dividend growth of around 70%, taking payouts above their pre pandemic second quarter total. Industrial, consumer discretionary and financial dividends were also strong. On the other hand, energy payouts fell as 2020 cuts came later than in some other sectors. Defensive sectors proved their resilience last year and therefore did not show strong growth this quarter.
At the company level, some of the biggest payouts this quarter included Samsung, which paid a large special dividend and jumped to the top of the table. In fact, it will be amongst the world's five largest dividends for the whole of 2021.
Dividends are very seasonal, so most of these Q2 top players will not be amongst the world's top 10 players for the full year. At a global level, dividends are much less concentrated than they are on a country by country basis. One of the real benefits of thinking globally when investing for income.
The world economy is rebounding strongly and company profits are recovering sharply, too. This is feeding through to a faster dividend bounce back than we initially forecast, and we are therefore upgrading our expectations for 2021 to $1.39 trillion U.S. dollars, a rebound of almost 11% on a headline basis or 8.5% underlying. Our new forecast is just 3% below pre pandemic levels. Amazingly, global dividends will regain pre-pandemic highs in just the next 12 months.
Unless otherwise stated, all data is sourced by Janus Henderson Investors as of 30 June 2021.
Index returns are provided to represent the investment environment existing during the periods shown. The index is fully invested, including the reinvestment of dividends and capital gains. Index returns do not include any transaction costs, management fees or other costs, and are gross of non-reclaimable withholding taxes, if any and unless otherwise noted.
Energy industries can be significantly affected by fluctuations in energy prices and supply and demand of fuels, conservation, the success of exploration projects, and tax and other government regulations.
This information is issued by Janus Henderson Investors (Australia) Institutional Funds Management Limited (AFSL 444266, ABN 16 165 119 531). The information herein shall not in any way constitute advice or an invitation to invest. It is solely for information purposes and subject to change without notice. This information does not purport to be a comprehensive statement or description of any markets or securities referred to within. Any references to individual securities do not constitute a securities recommendation. Past performance is not indicative of future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.
Whilst Janus Henderson Investors (Australia) Institutional Funds Management Limited believe that the information is correct at the date of this document, no warranty or representation is given to this effect and no responsibility can be accepted by Janus Henderson Investors (Australia) Institutional Funds Management Limited to any end users for any action taken on the basis of this information. All opinions and estimates in this information are subject to change without notice and are the views of the author at the time of publication. Janus Henderson Investors (Australia) Institutional Funds Management Limited is not under any obligation to update this information to the extent that it is or becomes out of date or incorrect.