Dividend payouts forecast for revival this year after pandemic cliff edge
Dividend payouts are expected to return to near pre-pandemic levels after miners and banks led a revival in the first quarter of 2021.
Asset manager Janus Henderson has upgraded this year’s forecast from $1.32 trillion to $1.36 trillion in its latest dividend index published today.
It comes after a strong first quarter for payouts which were just 2.9 per cent lower than in the same period last year, pre-pandemic, at $275.8bn.
Dividend payments fell at their slowest pace in a year, down just 1.7 per cent lower than the same period last year, a smaller decline than the three preceding quarters.
Since the outbreak of coronavirus, companies have cut dividends worth $247bn, equivalent to a 14 per cent year-on-year reduction, wiping out almost four years of growth.
Now Janus Henderson anticipates a return to near normal levels off the back of building momentum in the first quarter. Just one in five companies slashed its payout year-on-year last quarter, well above the 34 per cent over the last year overall.
“We are more optimistic given that Q1 was undoibtedly better than expected and we are now more confident that companies are willing and able to pay dividends, especially those companies that have traded well,” Jane Shoemake, client portfolio manager on Janus Henderson’s global equity income team.
“There is certainly much less downside risk to payouts this year than previously anticipated, though the timing and magnitude of individual company payouts is going to be unusually even and this will add volatility to the quarterly figures,” she added.
In the UK, payouts were down 26.7 per cent year-on-year due to the continued effects of oil company cuts, but less than half of British companies cut dividends in the period.
Globally, mining companies led the recovery as soaring commodity prices helped to drive growth with payments boosted by large one-off special dividends.
Miners raised their dividends by 85 per cent on a headline basis with more on the horizon, while utilities and healthcare firms also saw higher payouts.
Similarly, in the UK banks started to cautiously reinstate dividends after the Prudential Regulatory Authority shifted its approach to payouts. Last year the regulator effectively banned payouts but has now said dividends can be paid out of earned profit rather than balance sheet reserves.