Emerging market dividends expected to grow 5% in 2021

• China is by far the largest payer of dividends—it is expected to pay $121 billion in FY 2021
• We expect most sectors in emerging markets to recover in 2021, with the exceptions of automobiles and travel and leisure, banks, and oil and gas
• Saudi Aramco will remain the biggest dividend contributor in emerging markets ($75 billion) in 2021

Even though 2020 has been the most unpredictable year yet for dividends, especially in developed European markets, emerging market dividends have proved to be more resilient for the most part. In this report, we explore the different factors that could impact emerging market dividends in 2021 by looking at the role of regulations, international trade, and sector- and market-specific risks.

Emerging market dividend payers have continued to have higher payout ratios and maintained their relatively high yields, while somehow not increasing the risk to the dividend this year. We believe the reduced risk could be partially attributed to the ownership structure of some of the largest payers; a mix of state, family, and retail investors as opposed to the institutional ownership that is common in developed markets.

The Chinese government for example, has allowed state-owned companies to continue paying dividends to protect state government budgets and those of the more than 150 million retail investors that depend on dividend income. This, in addition to growing dividend payers, has led to an increase in aggregate dividend payouts in FY 2020 and FY 2021 as shown above. Although some of the parity shown is due to decline in dividends in developed markets it is nonetheless impressive, emerging market dividends continue to grow unabated and sometimes aided by huge additions such as Saudi Aramco.

Not all emerging markets are created equal, especially regarding dividends. MainlandChina is by far the largest payer of dividends among the group: it is expected to pay $121 billion in FY 2021 as shown below, almost twice what Saudi Arabia is projected to contribute for the same period (mostly from Saudi Aramco). Russia's decline in 2021 is mainly due to oil and gas companies cutting or suspending dividends.

Change in aggregate dividends by sector

To access the report, please contact dividendsupport@ihsmarkit.com

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