Pandemic creating regional, sectoral disparities in dividend payouts

After a rebound in 2021, global dividend payouts are expected to rise further this year, says a new report from IHS Markit.

The London-based market data firm reported that global dividends rose by 21% last year after an 8% drop in 2020.

It projects that dividends will rise another 6% this year to US$2.09 trillion from US$1.97 trillion last year.

“Though aggregate dividend payouts increased in 2021, the pandemic created starkly uneven paths across countries and sectors,” said Clara Besson, EMEA dividend research lead at IHS Markit, in a release.

In particular, she noted that dividends rose strongly in the Asia Pacific region last year, while only rising moderately in the Americas and hardly at all in Europe.

By sector, dividends followed the divergent effects of the pandemic. Tech sector payouts “boomed,” whereas hard hit-industries such as travel and leisure struggled.

“IHS Markit expects further regional and sectoral disparities due to supply chain disruptions, energy price volatility, inflation and the Covid-19 Omicron variant,” Besson said.

In the year ahead, the firm forecasts that dividends in the U.S. will rise by 5.4%, led again by tech and the healthcare sector.

For Europe, it sees 5.0% growth driven by banks, industrials and healthcare.

After leading the rebound in 2021, dividend growth in Asia is expected to slow from 23% last year to around 3.0% this year.

In terms of sectoral trends, pandemic restrictions “will continue to weigh on the travel and leisure sector,” it said, with payouts there expected to remain below their level in 2019.

“Similarly, the automobiles and parts sector is struggling to recover as supply chain shortages and raw material price hikes compress profitability,” it said, noting that dividends are also expected to languish below their pre-pandemic levels in that sector.

Dividend growth in the year ahead is expected in the industrials, healthcare and tech sectors.

Payouts are also seen rising in the energy sector, it noted.

Banks, which are the single largest source of dividends, are expected to pay out more than US$283 billion this year, the report said, “with the expectation that banks will prefer buybacks over dividends payouts this year.”

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.