Global dividends just a year away from pre-pandemic levels

By Cameron Micallef

August 23 2021
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The strong business recovery from the COVID-19 pandemic has seen a surge in global dividends, with experts now predicting dividends will reach pre-pandemic levels in just 12 months’ time.

In a boost for investors, analysis by Janus Henderson has revealed signals of strong growth for investors in Q2.

Globally, dividends jumped by 26.3 per cent year-on-year on a headline basis, recovering to $628.3 billion and are now only 6.8 per cent below their Q2 2019 level.

Janus Henderson’s client portfolio manager, Jane Shoemake, noted that, in Australia, the most important contribution was made by Westpac, which paid a dividend one-third lower than its pre-pandemic level.

Even so, this was significantly more than it was permitted to pay at the end of 2020.

In a seasonally quiet quarter for Australia, payouts more than doubled (+103.6 per cent) on an underlying basis.

Ms Shoemaker said the dividend market was following traditional boom and bust cycles.

“Just as the impact of the pandemic on company dividends has been consistent with a conventional but severe recession, so the recovery is also consistent with the rapid economic bounce-back now occurring in those parts of the world where vaccination programs are enabling economies to reopen,” she said.

She noted that across the world, the restart of cancelled dividends has driven the recovery so far, but they are also seeing stronger dividend growth than expected.

“Despite the severity of the recession last year, global dividends in aggregate will likely regain their pre-pandemic levels within the next 12 months,” Ms Shoemake said.

The portfolio manager also pointed out a number of key tailwinds for the market, with global leaders continuing to support businesses as they battle through the pandemic.

“The corporate world is awash with liquidity and the financial system is robust,” she continued.

“The banks generally hold surplus capital, and policymakers continue to provide fiscal and monetary support for economies, so this recovery will not be hampered by a weak banking system as it was after the global financial crisis a decade ago.”

Ben Lofthouse, head of global equity income at Janus Henderson, added investors who took advantage of the downturn last year, especially in the tourism sector, were the major benefactors of this turnaround.

“As the global economy rebounds, the broad recovery in dividends makes it possible for investors once again to have a wide spread of sectors that are generating income, diversifying the risk of stock and sector-specific issues,” Mr Lofthouse said.

“This is the approach our funds are following.

“In terms of the highest-yielding sectors, the financial services and commodity sectors dividend outlooks are the most improved since last year.”

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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