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 discusses the surprising resilience of dividends last year during the COVID-19 pandemic and outlines best- and worst-case scenarios for 2021 dividends.

Key Takeaways

• Our original expectation was that global dividends would fall by around 20% in 2020 due to the impact of the pandemic; in reality, the drop was just over 10%.
• Dividends varied widely by geography and sector. U.S. dividends proved especially resilient, increasing 2.6% year-over-year to a record high of $503.1 billion in 2020.
• Despite numerous headlines around dividend cuts, two-thirds of the companies in our index paid or grew their dividends in 2020.
• Given the continued uncertainty of the economic outlook, our best-case scenario is that global dividends will rise by 2-3% this year.

View Transcript

Jane Shoemake: Welcome to the latest quarterly update of the Janus Henderson Global Dividend Index. 2020 was a real year of winners and losers with regards to dividend payments, and there are three elements to the report that I would particularly like to highlight.

Firstly, global dividends were much more resilient than we anticipated. Post the Global Financial Crisis, dividends had fallen globally by around a third, and in the middle of last year, we thought that dividends would fall 20% due to the impact of the pandemic. But the report shows that dividends actually fell by just over 10%. So a significantly better outcome than we had originally forecast.

Secondly, there was a huge variation, both by geography and by sector, higher yielding countries such as the UK and Australia, where arguably dividend payments were high even prior to the pandemic, saw significant falls, whilst countries such as the U.S., Canada, Japan, China and Hong Kong continue to make payments and in some cases grow them. In the U.S. in particular, efforts to conserve cash by corporates were very much focused on suspending share buybacks, leaving dividends relatively unscathed, which was important given the U.S. accounts for around 40% of all dividends paid globally.

At the sector level there was a huge divergence. Defensive sectors such as health care and consumer staples continue to make payments, while sectors directly impacted by the pandemic, such as travel and leisure, saw huge cuts. Banks accounted for around a third of all the dividend cuts seen in 2020 as regulators in some parts of the world intervened to suspend dividend payments and ensure that banks had enough capital to weather the economic uncertainty. And the sharp collapse in the oil price also impacted the energy sector, with some companies such as BP and Shell taking the opportunity to completely rebase their dividend payments.

The final and last point is that whilst there were lots of headlines around dividend cuts, in reality, two-thirds of all the companies in our index actually paid or grew their dividends in 2020. And in particular, I’d like to highlight a couple of stocks in the technology sector. Nintendo, for example, increased its dividend by 80% last year after profits were boosted by the success of the Nintendo switch console. And Microsoft, which was the 25th largest player when the index launched in 2009, has grown its distributions so considerably that it is now the largest player globally in 2020.

So what is the outlook in 2021? Well, we think dividends may still fall in the first quarter of the year but will then bottom in April and start to rebound from there. There is still a lot of uncertainty over the economic outlook with the ongoing pandemic and subsequent lockdowns. But under our best-case scenario, we now expect global dividends to rise by between two to three percent this year. And it remains more important than ever for investors to ensure that they remain diversified both by geography and by sector.