Coronavirus: Dividend futures – the Nostradamus trade
Most European banks have indicated that they will suspend dividend payments after the Bank of England followed the European Central Bank in discouraging payouts to shareholders while the coronavirus crisis rages.
The list of non-bank companies suspending their dividends is also growing, with Goldman Sachs predicting a 25% fall in payouts by S&P 500 index members this year – a forecast that balances payments already made with a 38% fall for the last nine months of 2020.
Other analysts expect a fall in dividend payments from European companies that may be close to a decline in earnings of around 50%.
Global dividend payments rose by 3.5% last year to a record total of the equivalent of $1.43 trillion, according to a study released by Janus Henderson in February, which noted that underlying growth compared with 2018 was 5.4% before allowing for the effect of strength in the US dollar.
The US accounted for the biggest proportion of this, with dividend payouts of $490.8 billion. Dividends from European companies ex-UK were down slightly in dollar terms at $251.4 billion, but after adjusting for exchange rate movements underlying growth was at 3.8%.
Janus Henderson pointed out that expectations for company earnings growth were modest but felt confident enough to assert that: “2020 is set to deliver the fifth consecutive year of
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