Global dividend yields are expected to fall between 15 and 35% this year as the coronavirus pandemic hits companies’ earnings, according to Janus Henderson Investors.
The new prediction comes less than three months after the asset manager predicted 2020 dividend payments would rise by another 4% and total $1.48 trillion. In its revised prediction, the asset manager admits the record of $275.4 billion in dividends paid in Q1 2020 will probably remain a ‘high watermark’ for some time to come.
Janus Henderson Investors now expects a drop in dividend pay-outs of at least 15% to $1210 billion. Its worst-case scenario foresees a 35% drop to $933 billion.
Especially in Europe and the United Kingdom, there is strong political pressure to suspend or even cancel dividend payments for this year. Consequently, Janus Henderson Investors expects European dividends to be hit harder than those in North America and Asia.
The sectors most vulnerable for dividend cuts are banks, consumer discretionary, energy and other cyclical sectors. For example, banks banks suspended dividends altogether this year following an appeal by the ECB; a number of insurance companies based in Europe have now followed suit.
Uncertainty
Which of the two scenarios is most realistic strongly depends on how long the pandemic lasts and how great the damage is to listed companies, but also on the amount of support governments and central banks offer to businesses and the economy.
Recently, the German DZ Bank estimated that 40 percent of the companies in the European Stoxx 600 will not pay a dividend over 2019, estimating total pay-outs to fall by 23%.