What's going on?
Dividends – shambling through this weird apocalypse we call 2020 as clumsily as the rest of us – fell by the largest amount since records began last quarter. Gaaaaaaains.
What does this mean?
While second-quarter dividends still added up to almost $400 billion, that quarterly total was – according to investment manager Janus Henderson – the second-lowest since 2012. That’s thanks to a 19% quarterly decline versus the year before. And that’s thanks to the 27% of companies that cut their dividends, half of which suspended them altogether…
As the home of the world’s biggest stock market, the US was investors’ focus. But the UK and Europe had their fair share of trouble too: their payouts fell by around 40%, while France – the eurozone’s biggest source of dividends – saw its total fall to its lowest level in ten years. Switzerland and Japan made it through in one piece, mind you: both countries’ dividends barely changed.
Why should I care?
For you personally: Risk and Morty.
When you buy a stock, you take on the risk it’ll fall in value. Things like dividends and share buybacks, then, are ways companies reward you for taking a chance on them rather than almost-risk-free investments like government bonds. But with dividends dwindling and last quarter’s US share buybacks nearly halving, you mightn’t just want to rely on a company’s share price rise to make a profit – especially while stocks are at record highs.
The bigger picture: Regrets, he’s had a few.
One of US stocks’ biggest critics in the investment world had a change of heart this week: he no longer reckons they’re worth ditching right now, partly because unlimited central bank support is keeping valuations propped up. But it’s not like investors were paying much attention to his concerns or dividends’ turmoil anyway: they’ve been buying up stocks in their droves.