News: Europe’s dividend outlook lags, U.S. payouts head back to record.
LONDON (Reuters) – Investors are thronging the energy and finance-intensive equity markets of Europe, but dividend expectations remain far bleaker than in the US. The payouts will be well below the pre-pandemic level in the coming years.
European markets are benefiting from investors turning into reflation-oriented sectors and inexpensive “value” games, many of which are good at giving cash back to shareholders.
Indeed, many companies including Standard Chartered, Barclays and Volkswagen restored dividends as markets stabilized and regulators eased restrictions imposed at the height of the pandemic.
However, dividend expectations remain optimistic. Financial data provider IHS Markit predicts that European dividends next year will be 10% below 2019 levels. However, US payouts are expected to return to pre-pandemic levels by the end of 2021.
Refinitive I / B / E / S estimates that European dividends will be $ 269 billion over the next 12 months, compared to the $ 310 billion paid in the year ended March 2020. U.S. companies to pay out $ 510 billion over the next 12 months, approaching the record of $ 524 billion a year ago.
Graphic: Divi race: Europe catches up as US target record –
“Dividends are always caught in the middle,” said Grace Peters, investment strategist at JP Morgan Private Bank.
“People are either chasing stocks with high value or stocks with longer-term growth. This is typical of the beginning of the business cycle. We’ll see more interest in dividends in the latter part of the cycle. “
Company payouts to shareholders fell more than 10% globally in 2020, but European dividends – excluding the UK – fell by a quarter, according to Janus Henderson’s Global Dividend Index.
The pricing of derivatives is even more pessimistic than that of analysts. Dividend futures, which allow investors to comment on future payouts, feature European dividends through 2028 that are 10% below pre-pandemic levels.
Graphic: No Full Recovery From COVID Strike In Divis In Years? – –
Some analysts consider such futures prices to be too conservative, possibly due to the lack of liquidity. They find that US dividends in futures at the current level will be flat to slightly lower even through 2030.
“The markets tend to look very bleak about the dividend outlook. For two to three years after the 2009 financial crisis, futures meant sustained dividend cuts, ”said Kiran Ganesh, Head of Multi Asset at UBS Global Wealth Management.
Graphic: Achieve yield –
Reporting by Thyagaraju Adinarayan and Sujata Rao, additional reporting by Saikat Chatterjee. Editing by Mark Potter
Original Source © Reuters