Dividend plays took a considerable hit this fiscal year as payouts had been reduce or halted by corporations as they preferred holding on to money amid a pandemic. With normalcy hunting closer than ever ahead of, dividends could be back on track. “Consensus expects that Europe will not recover back to the FY18 DPS level even by FY22. Over the same period, Asia and US dividends will be 20% ahead,” mentioned analysts at Jefferies. The economic efficiency of firms has been enhancing more than the quarters now as they step out of the pandemic.
“In our view, a large portion of the dividend cuts were temporary or forced, and markets are underestimating the recovery. As the world opens up post-COVID, we believe that dividend recovery will surprise investors,” Jefferies mentioned. The report highlighted that globally, about 34% of corporations are set to reduce dividends for this fiscal year, but these cuts are set to drop to just 8.5% for the next economic year.
Talking sector-distinct, Jefferies mentioned that financials, cyclicals which includes commodities, industrials and customer discretionary reported the biggest dividend cuts in 2020 but will also be the ones to witness the strongest development in 2021. Consumer discretionary space, followed by components and financials are anticipated to witness the greatest dividend recovery.
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“While consensus already expects a large section of the stocks to recover back to previous DPS peak, we believe that there will be far more stocks that will exceed expectations,” the report mentioned. However, while the dividend is anticipated to recovery it will nonetheless be considerably significantly less than what was paid out in the course of 2018-2019.
Among the US-listed stocks that analysts at Jefferies think to dividend recovery plays include
General Electric: Expected 2021 dividend yield – .3%