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Shareholder payouts to hit $1.4 trillion in 2021, nearing pre-pandemic levels, research shows

The Samsung Electronics Seocho office building in Seoul, South Korea on Jan. 13, 2017.

Jean Chung | Bloomberg | Getty Images

Company payouts to shareholders are projected to hit $1.39 trillion in 2021, just 3% below their pre-pandemic peak, according to a new report from British asset manager Janus Henderson.

Dividend payments in the second quarter jumped 26% from the same period last year to $471.7 billion, just 6.8% below the levels seen in the second quarter of 2019. Janus Henderson projected that dividend payouts will return to pre-pandemic highs within the next 12 months.

The research, published Monday, said 84% of companies around the world either increased or maintained their dividends compared to the same quarter in 2020.

Much of the growth was attributed to companies restarting frozen payouts and issuing higher special dividends on the back of strong earnings. Underlying dividend growth in the second quarter, stripping out the effects of special dividends and exchange rates, was 11.2%.

Samsung surpassed Nestle as the world’s biggest dividend payer, with Rio Tinto, Sberbank and Sanofi also making the top five.

Samsung distributed a total of $12.2 billion to investors once its regular dividend was included, and Janus Henderson anticipates that it will likely be among the world’s top five payers throughout 2021.

“The rebound has been so much stronger than we anticipated, and I think it is very encouraging that we are seeing these companies feeling strong enough to return cash back to shareholders,” Jane Shoemake, client portfolio manager for global equity income at Janus Henderson, told CNBC on Monday.

Geographical divergence

Payouts in the U.K. surged 60.9%, and in Europe climbed 66.4%, while most of the dividend cuts were in emerging markets, the report said, reflecting the delayed impact from lower reported 2020 profits. It said dividend cuts in developed markets were “pre-emptive and precautionary.”

North America, meanwhile, saw record dividends in the second quarter, driven by Canada. However, payouts in the region had largely held up through 2020, meaning there was little rebound effect.

In Asia-Pacific outside of Japan, headline dividend growth was 45% annually in the second quarter, buoyed by Samsung’s one-off special dividend, with South Korea and Australia leading growth in the region. However, Singapore remained constrained by restrictions on banking payouts.

Japanese dividend payments also remained robust in 2020, but still managed underlying growth of 11.9% year-on-year.

In emerging markets, however, dividends fell 3.2% annually on an underlying basis, pulled down by lower 2020 profits, while just 56% of emerging market companies raised or held dividends steady in the second quarter.

Portfolio implications

Mining companies showed the fastest growth on the back of booming commodity prices, while industrials and consumer discretionary companies also bounced back strongly, the Janus Henderson research showed. So-called defensive sectors, such as telecoms, food and household products, maintained their characteristically consistent single-digit growth rates.

“In terms of the highest yielding sectors, the financial services and commodity sectors dividend outlooks are the most improved since last year,” said Ben Lofthouse, head of global equity income at Janus Henderson.

The firm has been adding to positions in these sectors in its equity allocations over the past 12 months in a bid to capitalize on this rebound. Many banks and financial services companies were subject to regulatory restrictions on dividend payments during the pandemic, which are now beginning to lift.

“The travel and leisure sectors remain hardest hit in terms of the Covid impact, and while many have adjusted operations to be able to survive, the sector is unlikely to be paying dividends until balance sheets recover, so we continue to avoid these for the time being,” Lofthouse added.

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