Topline
Global dividend payments fell by 1.7% in the first quarter, an improvement over the preceding three quarters which saw double-digit declines, according to a Wednesday report from asset manager Janus Henderson Group, suggesting dividend payments could rebound this year.
Photo by: STRF/STAR MAX/IPx 2021 4/26/21 S&P and Nasdaq close at record highs.
Key Facts
Dividend payments by U.S. companies slipped by only 0.4% year-over-year to $127.4 billion in the first quarter of 2021, compared to pre-pandemic first quarter 2020.
Dividend cuts by Wells Fargo, Boeing, Walt Disney, Occidental Petroleum and Marriott accounted for one-half of all dividend reductions by value among U.S. companies in the first quarter.
Globally, 18% of companies cut their dividends year-on-year in the first quarter, well below the 34% of firms that cut dividends last year.
Citing the relatively strong first quarter, Janus Henderson forecasts that global dividends will rise by 8.4% year-over-year to $1.36 trillion this year, an upgrade from its previous estimate of $1.32 trillion.
Key Background
Janus said that mining companies – like Hecla and Newmont – dominated the dividend picture in the first quarter, raising payouts by 85% on average, as “resurgent commodity prices have driven significant growth in payments boosted by large one-off special dividends.” Utilities like Algonquin Power and Chesapeake Utilities and healthcare stocks, including United Healthcare and Johnson & Johnson, also delivered strong dividend payouts in the quarter, Janus noted. The largest declines in dividend payments in the first quarter came from the consumer discretionary sector, down 36%. Consumer discretionary includes general retail, consumer durables, vehicles, and travel companies that were “directly impacted by continuing lockdown restrictions.”
What To Watch For
Matt Peron, director of research at Janus Henderson, stated that dividend payments in the U.S. are “poised to accelerate” through the end of the year as the “re-opening of the economy is expected to lift cashflows and improve balance sheets.” John Stoltzfus, chief investment strategist at Oppenheimer Asset Management in New York told Forbes that with “potential for further improvements in economic fundamentals and in corporate revenue and earnings growth” in the quarters ahead he also expects further dividend increases as the year progresses.
Contra
Stoltzfus cautioned, however, that one risk to future dividend increases by U.S. companies would be a “substantial increase” in the corporate tax rate, economic deterioration or a resurgence in the pandemic which would challenge the economic recovery. President Joe Biden said earlier this month that he would be amenable to a corporate tax rate of between 25% and 28% — up from the current 21% — to help pay for his massive infrastructure program.
Surprising Fact
While global companies cut dividend payments by an aggregate 12.2% to $1.26 trillion last year, dividends paid out by U.S. companies actually edged up 2.6% in 2021 to a record $501 billion. On the whole, North American companies, including Canada, accounted for nearly one-half of all dividend payouts in 2021, while companies in the U.K. and Europe suffered the biggest dividend cuts.
Further Reading
Investing Basics: How Do Dividends Work? (Forbes)
The Secret To 900% Returns With Safe Dividend Stocks (Forbes)
