Dividends Come Crashing Down as Asian Companies Preserve Cash

(Bloomberg) -- Companies in Asia Pacific are slashing dividends at the fastest pace in more than a decade as the coronavirus pandemic upends business plans and clouds the outlook for earnings.

About 23% of MSCI Asia Pacific Index members have scrapped or reduced payouts this year, according to data through July 20 compiled by Bloomberg. That’s the most for such a period since 2009, when 41% of index companies took such steps in the aftermath of the global financial crisis. Firms listed in China and Hong Kong make up a majority of those scrapping dividends, followed by corporates in Japan and Australia.

Having slammed company profits around the world, the uncertain duration and nature of the pandemic is now increasing pressure on firms globally to preserve cash. Global payouts could contract by 15% to 35% this year -- dropping to $933 billion in the worst-case scenario, according to a Janus Henderson Investors study published in May.

“The lack of a mass market solution to alleviate the disruptions caused by the virus may lead to a continued impact on corporate performance and dividends alike,” said Jingyi Pan, a market strategist at IG Asia Pte in Singapore. North Asian markets such as China, South Korea and Taiwan will “continue to be favored” on the back of better management of the pandemic, she added.

Earnings for companies on the MSCI Asia gauge tumbled by more than 60% in the quarter ended March. While the stock index has surged 38% from its year-to-date low, a resurgence of the virus in places such as Australia and Hong Kong is threatening to delay the region’s economic recovery.

Read: Samsung Heralds Key Pandemic Earnings in Asia: Taking Stock

The consumer discretionary and materials sectors have seen the highest instances of scrapped payouts, with companies including Nissan Motor Co., Wanda Film Holding Co., and Japan Airlines Co. having suspended dividends.

Still, the region has fared better than Europe where the central bank has asked banks to defer dividend payments. That’s contributed to about half of the Stoxx Europe 600 Index’s members either scrapping or reducing their payouts. Meanwhile, the U.S. has seen only 63 of the S&P 500 Index constituents announce such moves.

©2020 Bloomberg L.P.