As a result of the Coronavirus pandemic, we are seeing a huge global economic recession, as many companies have had to preserve their funds for essential business functions. Unfortunately, this mean that dividends 2020 are looking bleak. In fact, according to CNN, international payouts are expected to drop as much as 35%, or $497 billion dollars, this fiscal year. This large of a drop would surpass even the 30% reduction in payouts experiences during the 2008 financial crash. Many companies are already cutting or deferring dividend payouts as they scramble to form a financial plan for an uncertain future under the effects of COVID-19.
When are dividend payouts likely to recover?
Even worse for investors, the losses aren’t expected to end there. The effects of the pandemic are projected to last well into 2021 and possibly beyond, especially if there is a second wave of the virus that causes more economic closures. While earnings may likely recover as economies open back up, dividends will take longer to stabilize as companies are more conservative with their payouts in order to protect their future financial health by keeping reserves in the bank. This is expected to make dividend payouts a relatively unstable source of income for the next few years at least.
The Silver Lining
Fortunately, the experience that companies are getting during the pandemic will likely help them to better manage their capital in the future, translating to growth over time for investors. Depending on how quickly global and state economies are able to reopen, this may even encourage growth and affect dividend payouts for 2021.
The Coronavirus pandemic has certainly had a profound impact on the economic health of the world’s economies. While it may take some time to recover from such an unexpected and far-reaching crisis, financial analysts hope that companies who are able to stay afloat in these uncertain times will come out with a better awareness of their financial wellbeing and vulnerabilities, building a stronger economy in the long term. If your investments are seeing a significant downturn in the midst of the chaos, hold onto hope that as the pandemic subsides and the financial system restabilizes, profits will begin to recover and eventually thrive once again.
