Dividend Report from Janus Henderson Shows Strong Recovery

U.S. dividend payouts fell far less than expected last quarter, according to a new report from Janus Henderson Investors.

Only one in ten U.S. companies reduced their dividends, with payments dropping a mere 0.4% in Q1 2021 to total $127.4 billion. Global dividends also fared better than expected, dropping just 1.7%.

In comparison, the three prior quarters had all seen dividends drop by double digits.

As the global economy rebounds, dividend payouts are expected to grow this year. Janus Henderson has updated its dividend forecast to reach $1.36 trillion, a 7.3% underlying increase. Back in January the firm had a best-case forecast of $1.32 trillion.

“We’re expecting quite a strong bounce back this year in dividend payments,” Janus Henderson Investment Director Jane Shoemaker said in an interview with MSN.

U.S. Payouts Show Resiliency

A majority of U.S. dividend cuts came from a few high-profile companies. Wells Fargo was the only bank to cut dividends, and the firm joined with Boeing, Walt Disney, Occidental Petroleum, and Marriott to account for half of the U.S. cuts by value in Q1.

Though U.S. payouts were lower than last year, most of that came from special dividends from last year not repeating themselves.

“With a scarcity of yield across the world, the resilience of US dividend payments during COVID-19 lockdowns was a bright spot for income investors during the last twelve months. Looking ahead, dividend payments in the US are poised to accelerate through the end of 2021, as the re-opening of the economy is expected to lift cashflows and improve balance sheets,” said Matt Peron, Director of Research at Janus Henderson in a note to clients.

Globally, just 18% of all companies cut dividends, significantly below the 34% that did so last year. Payouts in Europe rose 10.8% on a headline basis, driven by catch-up payouts from Scandinavian banks. One third of European companies that pay dividends in Q1 cut their payouts, but this compares well to last year when one half did.

Hong Kong saw a 16.9% fall, while emerging markets were boosted by dividend restorations in India, Brazil, and Malaysia.

Mining and Healthcare Lead the Recovery

Mining companies, utilities, and healthcare all had strong quarters. Miners raised their dividends by 85% on a headline basis, 58% in underlying terms.

Meanwhile, eight of the top 20 companies with the largest increase in dividend value came from the U.S. healthcare sector. Each showed double digit growth.

Consumer discretionary sectors, such as retail, saw the biggest drop (36%) as they continue to be impacted by lockdown restrictions. Energy also lagged and tech took an unusual 1.5% tumble.

There exist a large number of dividend-focused ETFs that investors can add to their portfolios to take advantage of these promising economic indicators.

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