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U.S. dividends hit record high $503.1 billion in 2020, despite pandemic pain

Dividends paid out by U.S. corporations last year hit a record high, despite the havoc wrought by the COVID-19 pandemic that took hold of the country in earnest around the spring of 2020.

The U.S. saw a 2.6% year-over-year dividend increase to $503.1 billion last year, as just over 7%, or one out of 14, of companies cut dividends between April and December 2020, according to a report from Janus Henderson Investors.

The outlook for dividend payouts in 2021, however, remains uncertain even as successful vaccine rollouts are expected to help support a rebound in the economy domestically and outside of the country in the second half, the report finds.

The economy and stock market got rocked last March, with equities tumbling from all-time highs with unprecedented celerity, as the realization of the severity and scope of the deadly pandemic dawned on U.S. investors. From record highs in mid-February 2020, the Dow Jones Industrial Average
the S&P 500 index

and the Nasdaq Composite Index

sank to bear-market lows on March 23.

However, U.S. companies were able to mostly retain dividends and even boost the overall total payouts as chief executives and treasurers dialed back on stock buybacks.

Matt Peron, director of research at Janus Henderson Investors, told MarketWatch via email that buybacks in 2020 were slashed in half, to roughly $300 billion, last year, compared with a three-year average of approximately $700 billion.

“Buybacks typically get cut before dividends are cut, and resume when companies are confident they can maintain and/or resume dividend increases,” Peron said.

He noted that buyback announcements are starting to gather momentum, which may suggest that dividends will also see a pickup in 2021.

Globally, dividend cuts and cancellations between April and December 2020 totaled approximately $220 billion, with banks accounting for a good chunk of those reductions, followed by oil-and-gas producers — but two-thirds of companies in the world managed to increase or hold dividends steady.

Banks in particular were compelled to curtail investor payouts because regulators and executives wanted to preserve capital to guard against a possible wave of bankruptcies and loan defaults.

Globally, dividends fell to $1.26 trillion last year, down 12.2%, which was still less severe than a fall to $1.21 trillion that Janus had forecast. Dividend cuts were the harshest in Europe and the U.K., accounting for more than half the global total reduction for last year, according to Janus Henderson.

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