‘Worst-case scenario’ predicts $500bn of cuts to global dividends

Close to $500bn could be wiped from the value of dividends paid by companies around the world as they scramble to protect balance sheets from the economic damage caused by the pandemic.

Dividends have already been cut by tens of billions of dollars since the start of the crisis, with companies such as Shell and BT among those that have reduced payouts for the first time in decades.

According to fund manager Janus Henderson, the best-case scenario for global dividends this year is $213bn of cuts to leave a total payout of $1.21tn, a 15 per cent decline. But this includes only cuts that have already been announced or that are likely to be very soon.

In its worst-case scenario — which includes all those companies that Janus Henderson believes are vulnerable to cutting their dividend — global payments to investors could fall $493bn, or more than a third, to $933bn. 

Janus Henderson said that the range of outcomes is so wide because the crisis is developing rapidly and because of “the likelihood that some companies will simply reduce their payouts, rather than cancel them altogether”.

Its analysis found almost no impact on dividends in the first three months of the year, with total payouts rising 3.6 per cent to a record of $275.4bn.

During the global financial crisis, global dividends fell about 30 per cent. Janus Henderson said that some regions, such as the UK and Europe, could see bigger cuts than this.

North America is likely to be less affected, it said, in part because of the higher number of technology stocks but also because companies are more likely to suspend share buybacks than cut dividends.

In Europe, regulators have pressed companies in financial services such as banks and insurers to cut their dividends. The impact in Asia is likely to be delayed until next year, Janus Henderson said, with many companies having already fixed 2020 payouts based on 2019 profits.

Banking, consumer, oil, mining and industrial sectors such as aerospace are set to be hardest hit, it said, but dividends from technology, healthcare, food and basic consumer sectors “should be safer”.

“This downturn does look likely to be very steep, but the support from governments and central banks has been on an unprecedented scale, which we can only hope will make any recovery swift,” said Ben Lofthouse, co-manager of global equity income at Janus Henderson.

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