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Plunging dividends are hitting investors even as stocks rise

CNN Business and Moody's Analytics have partnered to create a Back-to-Normal Index. The index shows which states are closest to and furthest from returning to their pre-pandemic economies.

Posted: Aug 24, 2020 11:20 AM
Updated: Aug 24, 2020 11:20 AM

Dividends plummeted between April and June as coronavirus pandemic forced companies to conserve cash — a sign of how a tough economic environment could hit investors' pocketbooks even as stock prices push higher.

Details, details: A new report from Janus Henderson published Monday found that global dividends dropped by $108 billion to roughly $382 billion in the second quarter, the biggest decline since the asset manager started tracking dividends in 2009. The total value of payouts was the lowest for the second quarter since 2012.

Royal Dutch Shell, BP and Macy's are among the companies that suspended or cut their dividends in recent months.

"In a quarter of astonishing disruption to normal life around the world, the impact on dividends was dramatic," Janus Henderson's analysts wrote.

Changes to the dividend regime were broad-based. Dividends fell in every region except North America, which was bolstered by "resilient" payouts from Canadian companies.

Despite massive cuts to date, Janus Henderson still expects global dividends to top $1 trillion in 2020, indicating how much growth has occurred over the past decade.

On the radar: The firm said a reality check will come in the fourth quarter, when firms in North America announce payments for the next four quarters.

The US recession could end in 2020 or 2021

The historic recession the United States entered earlier this year could end in the second half of 2020 or in 2021, according to a survey of top economists, though the pain is expected to linger for years to come.

What's happening: About 35% of economists polled by the National Association for Business Economics, which spoke to 235 members between July 30 and August 10, believe that the country will exit the recession in the second half of this year, while 34% expect that to happen sometime in 2021.

Just 4% expect the recession to last into 2022 or later, while 15% think it already ended in the second quarter.

Even if the United States returns to growth this year, economists have made clear that huge risks remain, and that many of the economic scars will be permanent.

Nearly half of respondents don't think US GDP — the broadest measure of the health of the economy —will return to levels reached at the end of 2019 until at least 2022.

And nearly 80% of those surveyed believe there's at least a one-in-four chance of a double-dip recession, where economic output plunges again after a short period of recovery.

While the US economy remains far from normal, it is in comeback mode. CNN Business and Moody's Analytics have partnered to create a Back-to-Normal Index, which is comprised of 37 national indicators and seven state-level indicators to track the recovery.

The index shows that the US economy is operating at 78% of where it was in early March.

But the strength and longevity of the recovery is still an open question that relies in large part on the path of the virus.

"As the battle against Covid grinds on, it's difficult to escape the conclusion that successful economic policy starts with successful public health policy," Neil Shearing, group chief economist at Capital Economics, wrote in a note to clients on Monday.

Could the WeChat ban be limited? Investors hope so

Shares of China's Tencent, one of the most country's most important tech companies, have been battered as investors scramble to understand what it would mean if WeChat, its popular messaging app, is banned in the United States.

But optimism that any restrictions could be limited in scope drove the company's stock up 5.8% in Hong Kong on Monday.

The rally was driven by reports that the Trump administration is privately looking to reassure US companies like Apple that they'll still be able to do business with WeChat in China, even if individual users in the United States are affected.

Investor insight: Shares of Tencent fell nearly 10% after President Donald Trump signed executive orders on August 6 stating that he would bar WeChat and the short video app TikTok from operating in the United States unless they're sold by their Chinese-owned parent companies by mid-September. Since then, Tencent has clawed by most of its losses.

The company has been bolstered by its earnings report, disclosing surging profits between April and June. Still, the executive orders pose a major risk until the details of a possible US ban are finalized. TikTok said over the weekend that it plans to challenge Trump's executive order in court.

Up next

The Chicago Fed National Activity Index posts at 8:30 a.m. ET.

Coming tomorrow: Best Buy is the latest US retailer to report earnings.

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 608519

Reported Deaths: 9693
CountyCasesDeaths
Marion840461335
Lake45349684
Allen32803548
Hamilton29394315
St. Joseph27380381
Elkhart24404345
Vanderburgh19411249
Tippecanoe17970138
Johnson15069295
Porter14783169
Hendricks14401248
Madison10965221
Vigo10726181
Clark10677144
Monroe9383110
Delaware9116134
LaPorte9065163
Howard8236144
Kosciusko806983
Warrick672999
Hancock6697104
Bartholomew6484100
Floyd6428110
Wayne6136162
Grant5991115
Dubois555579
Boone551168
Morgan541295
Henry507864
Marshall503984
Cass483263
Dearborn479845
Noble473059
Jackson425047
Shelby417581
Lawrence391079
Clinton373043
Gibson370359
Harrison348144
DeKalb347164
Montgomery345754
Knox335639
Miami321444
Steuben313745
Whitley307326
Wabash303251
Adams300936
Ripley298445
Putnam296850
Huntington291659
Jasper289034
White273243
Daviess270474
Jefferson263338
Decatur247683
Fayette247148
Greene239862
Posey239328
Wells236051
LaGrange228862
Scott225339
Clay222532
Randolph213548
Jennings198936
Sullivan192333
Spencer191321
Washington186423
Fountain184027
Starke175443
Jay167623
Owen165737
Fulton164030
Orange159534
Carroll158015
Rush155118
Perry154229
Vermillion149134
Franklin148333
Tipton132332
Parke13078
Pike116926
Blackford111022
Pulaski97037
Newton90921
Brown88035
Benton86610
Crawford7999
Martin73713
Warren6817
Switzerland6615
Union6287
Ohio4907
Unassigned0376

Ohio Coronavirus Cases

Data is updated nightly.

Cases: 859841

Reported Deaths: 10680
CountyCasesDeaths
Franklin101171707
Cuyahoga855711125
Hamilton64017448
Montgomery43107418
Summit34836761
Lucas31350625
Butler30973232
Stark25786435
Warren19671140
Lorain19017223
Mahoning17321338
Lake16080154
Clermont15926111
Delaware1438878
Licking13204137
Trumbull12809316
Fairfield1279381
Greene12055137
Medina11591168
Clark10942265
Wood10348158
Allen9897126
Portage9296109
Miami916873
Richland9139118
Marion7459113
Tuscarawas7381182
Columbiana7327124
Pickaway726150
Wayne7034171
Muskingum703141
Erie6152129
Hancock552390
Ross548998
Scioto539164
Geauga508455
Darke470292
Ashtabula453073
Lawrence452654
Union451828
Sandusky436662
Mercer433589
Seneca430166
Huron428741
Auglaize422264
Shelby421222
Jefferson419269
Belmont416840
Washington388740
Athens38009
Putnam374975
Madison355129
Knox352622
Ashland344938
Fulton338443
Defiance330086
Crawford322374
Preble320637
Brown312921
Logan307332
Ottawa293943
Clinton290143
Williams278667
Highland275118
Jackson263845
Guernsey254125
Champaign252028
Fayette236530
Morrow23234
Perry231318
Holmes225474
Henry218749
Hardin213033
Coshocton205622
Van Wert202245
Gallia196726
Wyandot196051
Pike176217
Adams176115
Hocking172024
Carroll155616
Paulding144321
Noble120540
Meigs108624
Monroe100732
Harrison89121
Morgan83130
Vinton70213
Unassigned00
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