Dividend diet will not be permanent

D.he interest rates for everyone on overnight money etc. have been low for years. In view of the Corona crisis, the leading central banks, on the other hand, do not intend to turn key interest rates so quickly.

For investors, this means that they should also seek their salvation in the international financial markets in 2021 if they want to achieve a real return minus inflation. For many, long-term equity investments are therefore a must, and for years the free choice has consisted of receiving a solid dividend as the icing on the cake.

Pandemic curbs distributions

The dividend yield is an important benchmark. Stocks with a high, reliable dividend yield are understandably the favorites in the portfolios. But because of Corona, this “matter of course” had to suffer a little.

As the pandemic progressed, its impact on the ability of companies to pay dividends became clear this year, as the latest edition of the Janus Henderson Global Dividend Index shows. Accordingly, in the third quarter, the total of distributions worldwide fell by a total of 55 to 329.8 billion dollars, the lowest level since 2016.

According to Henderson, the total decrease of 14.3 percent was a minus of 11.4 percent on an adjusted basis. That in turn was an improvement over the slump of 18.3 percent in the second quarter. The fact that the third quarter turned out better was due to the geographical composition of global dividends: The regions with more consistent dividends, i.e. North America and the emerging markets, stood out in particular.

America’s corporations remain at the top

Eight out of ten American companies held or increased their distributions in the third quarter. Since America’s corporations in turn pay out two-thirds of the world’s dividends, these would also have supported the global total in the third quarter, according to Henderson. All in all, more than two thirds of companies around the world increased their dividends or kept them stable in the third quarter, while the rest cut or even canceled their dividends.

Chinese stocks were also an important pillar of dividends in the investor portfolios. The third quarter is the most important dividend season in China. There, the payments were 3.3 percent above the previous year’s level despite the corona pandemic. Three quarters of Chinese companies increased their payouts or at least kept them constant, according to Henderson data.

According to the Henderson Global Dividend Index, the largest declines in dividends were recorded by corporations in the consumer goods sector. There were dividend cuts of 43 percent on an adjusted basis. The result was mainly depressed by the big corona losers such as the automobile manufacturers and leisure companies.

Media and aerospace companies and banks were also hit hard. Conversely, investors who invested in sectors traditionally considered defensive saw higher dividends on an adjusted basis. Pharmaceutical companies, food manufacturers and food retailers in particular belonged to this group.

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To the detailed view

For 2020 as a whole, Janus Henderson expects, at best, an adjusted decline of 17.5 percent to $ 1.2 trillion, a loss of global dividend income of $ 224 billion. Jane Shoemake, Portfolio Manager at Janus Henderson explains: “This is no cause for celebration. However, we are encouraged by the fact that dividends have proven resilient in many parts of the world, particularly Asia, the United States, Japan and emerging markets. This resilience is partly due to the fact that companies are trying to absorb the disruption to their business for investors. “

Stay invested in solid stocks

Portfolio manager Shoemake encourages investors for the year 2021: Of course, a lot depends on the further course of the pandemic and on the severity and duration of further lockdown measures, but the expert says: “In our worst-case scenario, we assume that the dividends will remain unchanged in the coming year on an adjusted basis. ”At best, however, Henderson expects a recovery of around 12 percent.

Ultimately, when it comes to stock picking and dividends, investors are well advised to keep the quote from star investor Warren Buffett in mind: “Don’t take the annual results too seriously. Instead, focus on four or five year averages. “


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