Investors are expected to experience a significant decrease in their dividend payments due to the impact of the Covid-19 pandemic. Companies are taking measures to safeguard their balance sheets from the repercussions of the global crisis.
Janus Henderson, a global asset management group, has forecasted the best-case scenario for global dividends to be $1.21 trillion, reflecting a 15% decrease from the previous year, or $213bn. This estimation only takes into account the cuts that have been announced or will soon be announced.
Worst Case Scenario
Janus Henderson has also predicted a worst-case scenario where dividends could potentially decrease by $493bn to $933bn, representing a drop of more than a third. This figure includes all companies that are vulnerable to cutting their dividends.
Since the beginning of the crisis, tens of billions of dollars of dividend cuts have already been announced. This includes companies like BT and Shell, which are significant holdings in some of the UK’s largest pension schemes.
The potential outcomes are still uncertain due to the crisis, as reflected in the sharp fluctuations of the markets in recent weeks. Positive news about vaccines, therapeutics, or central bank support can have a sudden and dramatic impact. Conversely, setbacks in exiting lockdowns, new spikes in the disease, and medical setbacks can lead to sharp market declines.
Pre-Pandemic Outlook
Prior to the crisis, the global economy appeared to be defying the pessimistic projections.