In the next weeks it will be that time again when the obligatory reviews of the year gradually appear in the media. It is already obvious that the coronavirus pandemic will be the dominant theme in all retrospectives. The same applies for the outlook: when banks and research companies begin to offer their assessments of the year ahead, Covid-19 is certain to have a prevailing influence on the forecasts. In addition to the macroeconomic prospects, the virus has also thrown profit expectations into a complete spin. Many businesses have veered off their growth trajectory during the lockdown and have had to adjust their targets. Equity markets accordingly experienced a marked downward revision in earnings estimates, particularly in the early part of the year. It goes without saying that this trend cannot help but have an impact on dividends. When the pandemic was spreading ever more widely early in the year, many listed companies put a red pen through their payouts.
Two steps forward, one step back. According to calculations from Janus Henderson, the global dividend total in 2019 reached a record high for the fourth year in a row. Around the world, companies paid out USDtn 1.43 in total – 3.5% more than the year before (see graph). Although this represents a weakening of the growth rate, the longer-term track record continues to be strong. "In the last decade, dividends worldwide totalled USDtn 11.4," explains Janus Henderson. While the total has thus almost doubled, according to the asset manager, it climbed by an average 7.0% year on year. Europe excluding the UK – Great Britain remains the outlier because of the higher level of special dividends typically issued there – was unable to keep pace with the global pace in the ten-year period. Even so, Janus Henderson puts the growth rate at an impressive 53%. Swiss companies are among the paymasters of the old continent: in 2019, payouts in Switzerland reached a towering USDtn 39.3 overall (see graph).
This high figure cannot disguise the fact that the dividend total here has declined by just under 2%. This looks set to remain the case. Even the great significance of defensive companies is unlikely to be able to prevent the profits of Swiss businesses from shrinking in the current year. Payouts are hardly likely to escape this backward trend unscathed. This cannot do any harm to the status of the dividend as a significant income source. According to FactSet, the dividend yield in SMI (trailing, 12 months) is a good 3%. Although the 20 large caps did offer more, the 10-year average is 3.5%: a comparison just with the absolutely shrivelled yields on the bond market continues to make this key ratio a solid argument for equities as an investment class.
Given the question marks behind many payouts, the implementation of a dividend strategy depends more than ever on a holistic approach. In other words, other parameters should flow into stock picking alongside the yield. Christian W. Röhl has dedicated himself to screening entire markets for the most attractive dividend-bearing shares. The author and entrepreneur brings more than two decades of stock market experience into the equation. On his "DividendenAdel" research platform, Röhl publishes statements, strategies and statistics for a long-term positioning in high-yielding equities. Since the start of the year, the strategy he developed has hinged on two benchmarks. At the start of October Röhl reviewed and adapted the composition of the DividendenAdel indices for Germany and Switzerland to take account of the radical change in the environment. The barometer now features those companies offering the possibility of attractive, continuous and growing payouts even in times of crisis.
