The outbreak of infection (COVID-19) has significantly affected the dividend policy of companies around the world.
Dividends, along with share repurchases, remain the primary means how the companies pay their profits to their shareholders. Dividend payments represent an important source of cash for many private investors, pension funds, and hedge funds. This has become even more relevant in recent decades against the backdrop of declining bank interest rates. When the yield on fixed income instruments is low, dividend payments become even more attractive to investors. Aside from providing attractive returns, the prospects for capital gains are also tempting. As investors hunt for profitability, many companies even borrow money to pay dividends to their shareholders.
The COVID-19 crisis is putting unprecedented pressure on the global economy, worsening overall performance. Companies around the world have been forced to revise their dividend policies and cut their dividend payments.
According to the Janus Henderson Global Dividend Index (August 2020), in the second quarter of 2020, dividend payments fell 22% to $ 382.2 billion. However, there were significant differences across regions and industries. Dividends in North America were almost flat over the year, while in Europe 54% of companies cut their dividend payments. In France, payouts fell 57%, Spain 70%, Germany 19%, while Switzerland did not see any changes (on a year-to-year basis).
As for the industries, only communications and healthcare remained stable.