A Shell garage
Companies including Royal Dutch Shell suspended, cut or axed payouts in an attempt to shore up their balance sheets © Andrey Rudakov/Bloomberg

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Global dividends suffered the worst quarterly fall in a decade, with more than $100bn wiped off their value in the three months to June, as companies ditched payouts in response to the coronavirus pandemic.

Total shareholder payouts fell by about a fifth, to $382.2bn, the lowest second quarter total since 2012, according to Janus Henderson, the fund manager that tracks dividends globally. The 22 per cent — or $108.1bn — decline was the most severe since the group launched its global dividend index in 2009.

Companies including the UK’s Royal Dutch Shell, Australia’s Westpac and Boeing in the US, suspended, cut or axed payouts in an attempt to shore up their balance sheets.

The asset manager said that in the best-case scenario, it expected dividends to fall by 19 per cent on an underlying basis this year, or 25 per cent in its worst-case. It had previously forecast falls of up to 35 per cent.

“Despite the cuts witnessed so far, we still expect global dividends to exceed $1tn this year and next,” said Jane Shoemake, investment director for global equity income at Janus Henderson.

Even so, 2020 will be the worst year for dividends since the global financial crisis.

The group said that during the second quarter total payouts fell in every region in the world, except in North America, which benefited from resilience among Canadian companies. The worst affected regions were the UK and Europe.

In the UK, companies paid out $15.6bn between April and June, down from $34bn in the same quarter in 2019. Dividend payments in France dropped to $13.3bn during the quarter, compared with $38.4bn for the same period last year.

Ben Lofthouse, head of global equity income at Janus Henderson, said a drop of a fifth in dividend payments this year would be painful for investors. He added that it would probably take several years to recover to pre-Covid-19 levels.

But he said that outside a few markets, such as France and the UK, many companies had carried on paying dividends, despite the pandemic.

“The short-term dividend cut or halt doesn’t necessarily change the long-term valuation of companies,” said Mr Lofthouse. “It is problematic for this year . . . but we are already starting to see some of those [who cut] coming back.”

Several UK companies have announced in recent weeks that they plan to resume dividends, including housebuilder Persimmon and insurer DirectLine.

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The Janus Henderson report found that Nestlé was the biggest dividend payer during the quarter, followed by Rio Tinto and China Mobile. Microsoft also ranked among the top 10, having not appeared on the list in previous years.

Thomas Schüssler, co-head of equities at DWS, the global asset manager, said it was a “tough environment” for income-based investment strategies.

But he added: “As income investors we are not in favour of cutting the dividend, but if your earnings go way down, a dividend cut can be a reasonable thing to do.”

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