Companies hang onto dividends despite pandemic worries

Some 40% of global companies managed to increase or initiate a dividend during the second quarter of 2020, despite the ongoing COVID-19 pandemic which has caused many firms to cut dividends to zero.

In total, global developed markets paid out $465 billion in Q2 with the most coming from financials which paid out 20% of all total dividends at $97 billion.

Healthcare and IT were the only two sectors which saw dividend growth though, up 9.2% and 2% respectively during the quarter. Financials, despite being the largest sector-payer, were down 40% and consumer discretionary stocks were down over 70%.

The number of companies which cut dividends to zero was 29%, a stark difference from the 2019 quarterly average of 6%, with firms including Westpac, ANZ and Sydney Airport.

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According to the quarterly ‘Global Income’ report from Plato Investment Management, while the Q2 figure was a slight increase on the first quarter, it remained 28% down from the same period a year ago.

Dan Pennell, manager of the Plato Global Shares Income fund, said taking a global approach to equities could prove more worthwhile for investors than solely focusing on Australian equities.

“It is clear the impacts of COVID-19 on global equities have been very sector and company specific. The dividend growth in the healthcare and IT sectors is reflective of increased demand during the global health crisis, while non-essential goods and services offered by many global consumer discretionary sector businesses have seen plunging demand,” he said.

“An allocation to global shares in investors’ income generating portfolios can play an important diversifying role, helping Australian investors avoid the concentration risks that come with relying solely on dividends from Australia’s traditional dividend-paying stocks.”