Now in its sixth year, the Janus Henderson Global Dividend Index is a quarterly long-term study that analyzes dividends paid by the 1,200 largest firms by market capitalization. In this video, Investment Director Jane Shoemake provides an update on dividend trends over the last quarter, along with a new “best and worst” forecast range for 2020.

Key Takeaways

• Given the unprecedented halt in economic activity we have experienced as a result of COVID-19, dividend cuts and suspensions were inevitable. However, it is worth remembering that most large global companies are still operating. We expect many of these companies will resume payments once the crisis subsides.
• In addition, two-fifths of global dividends are paid by companies that are more defensively positioned, and here we expect dividends to be resilient.
• An active approach to stock selection will be critical in 2020, as it is more important than ever to ensure portfolios are well diversified, both geographically and by sector.

View Transcript

Jane Shoemake: Welcome to the latest quarterly update of the Janus Henderson Global Dividend Index.

The outlook for dividends in 2020 has changed dramatically given the spread of COVID-19 around the world and the subsequent government lockdowns that is having a huge impact on economic activity, corporate revenues, profits and dividends. In the first quarter, the vast majority of dividends were actually paid and the Index reached a new high, but we anticipate this will be temporary given the number of announcements we have seen in recent weeks regarding dividend cuts and suspensions. Geographically, the UK and Europe, two of the high-yielding markets, have been the most impacted so far, whilst at the sector level we have seen cuts from banks, retailers, leisure and tourism, energy and construction companies amongst others.

To help us try and assess what the impact is going to be on dividends this year, we are introducing a best- and worst-case forecast range. According to our analysis, under the best scenario, dividends will fall by around 15% this year. And under the worst-case scenario, it could fall by as much as 35%. But to put that into context, during the Global Financial Crisis, global dividends fell 30% from peak to trough.

Given the unprecedented halt in economic activity that we have experienced, dividend cuts and suspensions were inevitable, but it is also worth remembering that most large global companies are still operating. And for those that have had to cut their dividends, we anticipate that they will be able to resume payments once the crisis subsides. In addition, two-fifths of global dividends are paid by companies that are more defensively positioned, such as those in health care, technology and consumer staple sectors, and here we expect dividends to be resilient.

So there is no doubt that 2020 is going to be a challenging year for income investors and an active approach to stock selection will be critical. It is now more important than ever to ensure that portfolios are diversified as well, both geographically and by sector.

 

Source: Janus Henderson Investors, May 2020

 

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