Global dividend payments could rebound by as much as 5% this year, a new report estimated on Monday, after the coronavirus caused the biggest slump in payouts since the financial crisis more than a decade ago.
Companies' payouts to shareholders plunged more than 10% on an underlying basis in 2020 as one in five cut their dividends and one in eight cancelled them altogether.
A total of $220 billion worth of cuts were made between April and December, based on investment manager Janus Henderson's Global Dividend Index. But there are signs companies are beginning to reinstate at least some of them.
Janus Henderson's report warned that dividends could still fall 2% this year, in a worst-case scenario. But its best-case scenario sees 2021 dividends up 5% on a headline basis.
"It is quite likely we will see companies pay special dividends in 2021, utilising strong cash positions to make up some of the decline in distributions in 2020".
Banking dividends will be likely to drive the rebound in payouts in 2021, the report said, after the European Central Bank and Bank of England eased blanket bans for lenders on dividends and buybacks. These were imposed during the first wave of the crisis to prepare for a potential increase in bad loans.
UK lenders Barclays and NatWest resumed payouts this month.
Last year, dividend bans meant banks cut or cancelled $70 billion of payments globally, according to the report.
GRAPHIC: Global annual dividends and 2021 forecast
But the overall global dividend cuts proved less dramatic than expected. In August, Janus Henderson had expected the virus to drive corporates to cut $400 billion worth of dividends, nearly double the eventual outcome.
A resilient fourth quarter of 2020 helped, said Janus Henderson. The likes of German car maker Volkswagen and Russia's largest lender Sberbank restored payments.
GRAPHIC: Global dividends cuts by sector
Mining and oil companies cut dividends after a slump in commodity prices, while consumer discretionary companies also took a hit following lockdowns.
European dividends, not including Britain, fell by 28.4% on an underlying basis in 2020 to $171.6 billion. "This was the lowest total from Europe since at least 2009," Janus Henderson said.
GRAPHIC: Dividend cuts by region
In contrast, North American payouts rose 2.6% for the full year, setting a new record of $549 billion, the report said. Canada had the fewest dividend cuts anywhere in the world, the index showed.
GRAPHIC: Biggest dividend payers