European dividends at record low since 'at least 2009': study

Europe
On the 02/22/21 at 12:23PM

by

Adrien Paredes-Vanheule

According to the 2020 edition of the Janus Henderson Global Dividend Index, only Switzerland has managed to maintain its dividends in the aftermath of the Covid-19 outbreak across European countries.

The Covid-19 pandemic has taken its toll on global dividends but it was not as significant as the drop observed following the 2007-08 global financial crisis, according to the annual global dividend index study of US asset manager Janus Henderson. Thus, the influence on dividends “has been consistent with a conventional, if severe, recession.” It added, “places like the UK, Australia and parts of Europe suffered a greater decline because some companies had arguably been overdistributing before the crisis and because banking regulators intervened.”

A total of $1.255trn dividends were distributed globally in 2020, down 12.2% year-on-year, with Microsoft, AT&T and Exxon Mobil having been the three biggest dividend payers. Within this figure, global companies paid $965bn dividends to their shareholders between April and December 2020. Dividends of European companies, excluding UK, dipped 28.4% to $171.6bn for the full year 2020. Janus Henderson said this was the lowest total from Europe since at least 2009. It “reflects both the slow growth from this region between 2009 and 2019 and the severe impact in 2020 of the pandemic.” Following the Covid-19 market turmoil in March 2020, half of European companies in the US manager’s index have either cut (25% of companies) or cancelled dividends (25% of companies) last year for a total of $70bn between April and December. “The biggest impact came from the banks, accounting for half the total lost income. Cuts from car manufacturers and insurance companies were also very large,” stressed Janus Henderson.

Seven in ten French companies trimmed dividends after Covid-19 turmoil

The investment manager underlined “a very wide variation from country to country” with Belgium, Sweden, and Luxembourg recording the steepest declines between Q2 and Q4, with payouts plummeting 66%, 73% and 83% yoy respectively. These stock markets were impacted by dividend changes from local large caps. Janus Henderson highlighted Switzerland was the only major European country to escape the dividend fallout from the pandemic. The country was Europe ex-UK’s largest payer last year with $42bn dividends paid over 2020 (+6.6% yoy), stable between Q2 and Q4 year-on-year, before Germany and France.

Almost one in three German companies (32%) cut or cancelled dividend payout between April and December, resulting in a 14.8% drop in dividends for the year ($37.3bn). “The lack of strong banks in Germany, even before 2020, partly explains the outperformance, but the refusal of Germany’s largest payer, Allianz, to submit to pressure from the EIOPA (the EU Insurance regulator) to suspend dividends also significantly limited the downside,” stressed Janus Henderson. But that is in France where the manager sees the biggest influence on 2020 European dividends as it made up more than a third of European dividends’ drop. French companies’ dividends fell $25bn yoy between Q2 and Q4, with widespread cuts. France recorded a 44% yoy decrease in dividends for the full year 2020, to $35.8bn paid to shareholders. “Seven in ten French companies made reductions, one of the highest proportions in the world,” said Janus Henderson. That same proportion was observed in Spain too, where Spanish firms’ dividends fell 37% over the year, returning $14.7bn to investors, with $10.9bn paid between Q2 and Q4.

As for Italy, 55% of local large caps either cancelled or cut dividends between April and December 2020, with $7.2bn dividends paid during the period (over $9.4bn in 2020, down 41.4% yoy). “The loss of banking dividends was the main contributor to Italy’s lower payouts, though there was a significant impact from transport infrastructure company Atlantia and oil group Eni too,” said Janus Henderson.

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