Australian dividends fell by 38% between April and December 2020, largely due to reductions in banking dividends enforced by the regulator.
According to the Janus Henderson Global Dividend Index, global dividends fell to $1.63 trillion in 2020 which was down 12.2% on a headline basis. However, this was better than the firm had expected due to a smaller fear than feared in the fourth quarter.
Australia was one of the worst-affected markets, alongside the UK and Europe, due to the forced restrictions on banking dividends. In Australia, the Australian Prudential Regulatory Authority limited financial dividend to less than 50% of earnings until December.
China, Hong Kong, Switzerland, and Canada were among the best-performing nations.
The firm forecast 2021 dividends could rise 5% on a headline basis to $1.71 trillion, although there would still be falls in the first quarter, while the worst-case scenario would be a headline fall of 2%.
Matt Gaden, head of Australia at Janus Henderson, said: “The disruption in some countries and sectors has been extreme, but a global approach to income investing meant the benefits of diversification have helped mitigate some of these effects. Crucially, the world’s banks (which usually pay the largest share of the world’s dividends) mostly entered the crisis with healthy balance sheets.
“Bank dividends may have been restricted by regulators in some parts of the world, but the banking system has continued to function, underpinned by robust capital levels, which is vital for the smooth operation of economies. There is still another challenging quarter to come. Q1 will see payouts fall, although the decline is likely to be smaller than between Q2 and Q4 2020.
“Finally, as is usual in challenging economic environments, dividends are exhibiting stability relative to profits. This is one reason why dividends are such an important consideration for investors.”