International Dividends Got Crushed in Q2 2020

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Cornflakey
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International Dividends Got Crushed in Q2 2020

Post by Cornflakey » Fri Jun 26, 2020 12:13 pm

I was anticipating Q2 dividends to be beaten down given the Great Lockdown but almost all of my US mutual funds and ETFs posted modestly increased or flat dividend income this quarter over Q2 2019.

Not the case in my international holdings however:

HOLDING Q2 2019 Q2 2020 +/-
VEA (Developed Markets ex-US) $71.71 $23.48 -$33.27
VWO (Emerging Markets) $48.03 $30.24 -$17.79
VGK (Europe) $83.94 $31.39 -$52.55

Other than the obvious economic volatility roiling the globe, anyone have a good explanation why US equity funds/ETFs managed to maintain or modestly increase the dividend while their international counterparts could not?

byline0802
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Re: International Dividends Got Crushed in Q2 2020

Post by byline0802 » Fri Jun 26, 2020 12:27 pm

In Europe, many companies were prohibited from issuing dividends because governments were/are not making pandemic financial support available to companies that were issuing dividends - the thinking is if you have strong enough finances to issue dividends, than you don't need state support. AB Volvo in Sweden for instance, had its most profitable year ever last year, but did not issue dividends, at least so far this year. However, many European companies have reserved the right to hold an additional "annual" general meeting later this year to reconsider dividends if they did not wind up taking state support.

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Cornflakey
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Re: International Dividends Got Crushed in Q2 2020

Post by Cornflakey » Fri Jun 26, 2020 1:38 pm

Thanks Byline. I figured European governments and central banks would be much more scrupulous in ensuring recipients of corporate assistance suspend dividends and buybacks. Makes one wonder if there could be a compensatory bumper dividend down the roads in the quarters to come when the great pestilence is a thing of the past.

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grayfox
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Re: International Dividends Got Crushed in Q2 2020

Post by grayfox » Fri Jun 26, 2020 2:35 pm

What I have noticed is that, in general, European companies have a different dividend policy than the U.S.

Europe: I feel that many European countries pay most of their earnings as dividends, because the dividend yield is high and dividend fluctuates as much as earnings. One year up +100%, the next year down -50%. Very erratic. And I notice that much or all of the return comes from dividends and very little from price increases. E.g. UK ETF EWU. Yahoo shows dividend yield = 5.49% but the price today (25.46) is about the same as when the fund started in 3/1996 (24.75). It's like a high-dividend stock that has no growth. In between, the price fluctuated, but no price increase over almost 25 years.

U.S.: In the aggregate S&P 500 companies pay out something like 40% of earnings as dividends. When earnings fall, there's a cushion. So they can maintain the dividend. The result is a smooth dividend stream that gradually increases over time with earnings growth. The only time dividends have been cut was in severe recession like 2008/2009 when S&P 500 dividends were cut by -25%. See SPY. Yahoo shows dividend yield = 1.90%. But the price has increased 5-fold in about 25 years.
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Electron
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Re: International Dividends Got Crushed in Q2 2020

Post by Electron » Sat Jun 27, 2020 3:18 pm

I was just getting ready to post on the very same subject.

The dividends paid by Vanguard FTSE All-World ex-US Index Fund dropped 35.37% in the first quarter and 56.50% in the second quarter. The comparisons are relative to the dividend paid in the same quarter of the previous year. The large drops were quite a surprise.

This should translate to less foreign tax paid for many of us in 2020. It would also result in lower foreign income for those who file IRS Form 1116.
Electron

nalor511
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Re: International Dividends Got Crushed in Q2 2020

Post by nalor511 » Sat Jun 27, 2020 3:57 pm

<divs = :thumbsup

Random Poster
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Re: International Dividends Got Crushed in Q2 2020

Post by Random Poster » Sat Jun 27, 2020 9:38 pm

Edit: Nevermind. I miscalculated something.

ace_it
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Re: International Dividends Got Crushed in Q2 2020

Post by ace_it » Sat Jun 27, 2020 10:24 pm

I have Canadian versions of the US ETF's, such as
XUU -14.2%
VUN +5.4%

I was comparing the dividends of Q2 2020 to Q2 2019, which are shown above.

This is likely due to the VUN version has more weight on finances, while the XUU version has more weight on tech.

I was pleasantly surprised that my Canadian ETF's dividends all have raises compared to Q2 2019.

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Riprap
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Re: International Dividends Got Crushed in Q2 2020

Post by Riprap » Sat Jun 27, 2020 10:45 pm

The timing of March 2020 dividends were a couple of weeks earlier than normal for the 500 Index fund which seems to have caused a pretty sharp drop from 2019.

Mar 2019: $1.4561
Mar 2020: $1.1794
-19.0 %

Jun 2019: $1.3893
Jun 2020: $1.4350
+3.3%

1st Half 2019: $2.8454
1st Half 2020: $2.6144
-8.1%

So it looks like the 500 Index is down comparing 1st half of 2020 to 1st half 2019

Euro Index Fund:

1st half 2019: $ 1.5763
1st half 2020: $ 0.7350
-53.4%

palanzo
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Total International Q2 Dividend

Post by palanzo » Sun Jun 28, 2020 3:59 pm

[Thread merged into here, see below. --admin LadyGeek]

Has anybody else noticed that the dividend for Total International and FTSE ex-USA decreased by about 60% in Q2? I would not have been surprised at a 30% decrease as we encountered in 2008/2009. The decrease in TSM was much less marked. What is the reason for the large decrease in the dividend for International funds in Q2 compared to TSM? For those who need to make estimated tax payments how do you do those estimates with dividends changing so much from the same quarter a year ago?

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Flobes
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Re: Total International Q2 Dividend

Post by Flobes » Sun Jun 28, 2020 4:12 pm

palanzo wrote:
Sun Jun 28, 2020 3:59 pm
Has anybody else noticed that the dividend for Total International and FTSE ex-USA decreased by about 60% in Q2?
Noticed and explained a few days ago:
International Dividends Got Crushed in Q2 2020

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Re: Total International Q2 Dividend

Post by jebmke » Sun Jun 28, 2020 4:40 pm

palanzo wrote:
Sun Jun 28, 2020 3:59 pm
For those who need to make estimated tax payments how do you do those estimates with dividends changing so much from the same quarter a year ago?
I usually set up my ES payments using the safe harbor amount. By January 2 or so, I know exactly what the dividends were so I adjust the 4th quarter payment accordingly.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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Re: Total International Q2 Dividend

Post by palanzo » Sun Jun 28, 2020 4:50 pm

jebmke wrote:
Sun Jun 28, 2020 4:40 pm
palanzo wrote:
Sun Jun 28, 2020 3:59 pm
For those who need to make estimated tax payments how do you do those estimates with dividends changing so much from the same quarter a year ago?
I usually set up my ES payments using the safe harbor amount. By January 2 or so, I know exactly what the dividends were so I adjust the 4th quarter payment accordingly.
By safe harbor amount do you mean 90% of what you paid last year? I would do that too except I will be paying a lot less tax this year than last year. So this year is a transition year and I will be able to do what you suggest next year.

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Re: Total International Q2 Dividend

Post by palanzo » Sun Jun 28, 2020 4:52 pm

Flobes wrote:
Sun Jun 28, 2020 4:12 pm
palanzo wrote:
Sun Jun 28, 2020 3:59 pm
Has anybody else noticed that the dividend for Total International and FTSE ex-USA decreased by about 60% in Q2?
Noticed and explained a few days ago:
International Dividends Got Crushed in Q2 2020
Thank you! I put International Dividend in the search engine and did not get a hit. The search engine does not seem to provide current hits. Next time I will add 2020 which does find the thread above.

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Re: Total International Q2 Dividend

Post by jebmke » Sun Jun 28, 2020 4:52 pm

110% is my safe harbor amount, per IRS guidance. If income is < $150K (IIRS) the amount is 100%
When you discover that you are riding a dead horse, the best strategy is to dismount.

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Re: Total International Q2 Dividend

Post by jebmke » Sun Jun 28, 2020 4:53 pm

palanzo wrote:
Sun Jun 28, 2020 4:50 pm
By safe harbor amount do you mean 90% of what you paid last year? I would do that too except I will be paying a lot less tax this year than last year. So this year is a transition year and I will be able to do what you suggest next year.
Do you think your tax will be significantly less than 75% of this year?
When you discover that you are riding a dead horse, the best strategy is to dismount.

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Re: International Dividends Got Crushed in Q2 2020

Post by LadyGeek » Sun Jun 28, 2020 5:18 pm

I merged palanzo's thread into the on-going discussion. The combined thread is now in the Investing - Theory, News & General forum (general discussion).
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Re: Total International Q2 Dividend

Post by palanzo » Sun Jun 28, 2020 6:04 pm

jebmke wrote:
Sun Jun 28, 2020 4:53 pm
palanzo wrote:
Sun Jun 28, 2020 4:50 pm
By safe harbor amount do you mean 90% of what you paid last year? I would do that too except I will be paying a lot less tax this year than last year. So this year is a transition year and I will be able to do what you suggest next year.
Do you think your tax will be significantly less than 75% of this year?
Less than 75% of last year (2019). Yes.

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Re: International Dividends Got Crushed in Q2 2020

Post by jebmke » Sun Jun 28, 2020 7:44 pm

I' suggest just start with two quarters at some high rate and true up in September and January when you have better info. Penalties are usually not large and not a big deal. I often have a small one - it is just part of the process if one has highly variable income.
When you discover that you are riding a dead horse, the best strategy is to dismount.

palanzo
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Re: International Dividends Got Crushed in Q2 2020

Post by palanzo » Sun Jun 28, 2020 7:54 pm

jebmke wrote:
Sun Jun 28, 2020 7:44 pm
I' suggest just start with two quarters at some high rate and true up in September and January when you have better info. Penalties are usually not large and not a big deal. I often have a small one - it is just part of the process if one has highly variable income.
Good idea. We already know the dividends for Q1 and Q2. So use those for Q3 and Q4 or use Q3 and Q4 from last year?

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Re: International Dividends Got Crushed in Q2 2020

Post by palanzo » Mon Jun 29, 2020 2:38 pm

LadyGeek wrote:
Sun Jun 28, 2020 5:18 pm
I merged palanzo's thread into the on-going discussion. The combined thread is now in the Investing - Theory, News & General forum (general discussion).
Thank you for moving my thread LadyGeek.

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grayfox
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Re: International Dividends Got Crushed in Q2 2020

Post by grayfox » Thu Jul 02, 2020 6:51 am

I thought I would look at year-over-year changes to distribution in 2020 for Vanguard U.S. and International funds.

For U.S., I looked at S&P500 (VFINX), Total Stock Market (VTSMX) and High-Dividend (VYM).
For International, I looked at Total International (VGTSX), International High Dividend (VYMI), and EUROPE (VEURX), Pacific (VPACX) and Emerging (VEIEX).

Code: Select all

                U.S.                            International
Quarter         VFINX   VTSMX   VYM             VGTSX   VYMI    VEURX   VPACX   VEIEX

2020-03         -19.9%  -22.1%  -14.9%          -39.0%  -37.1%  -21.2%  -99.5%  -53.5%
2020-06          3.6%    29.2%   34.0%          -59.6%  -49.3%  -65.0%  -58.6%  -42.2%
In Q1, all distributions were cut. But international was cut by twice as much. VPACX only paid $0.0001 per share.

The surprising things is that in Q2, U.S. distributions were actually above the previous year! How did that happen?
Meanwhile international was down even more than in Q1!

International investors can't seem to catch a break. No wonder there is so much sour grapes from the pro international investors.
Sic transit gloria mundi. [STGM]

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Re: International Dividends Got Crushed in Q2 2020

Post by jebmke » Thu Jul 02, 2020 8:36 am

grayfox wrote:
Thu Jul 02, 2020 6:51 am
The surprising things is that in Q2, U.S. distributions were actually above the previous year! How did that happen?
I have wondered the same thing. My theory (with no evidence) is that there are some timing differences is dividends payouts between Q1 and Q2. Q1 was down from prior year so YTD, the total US market dividend is approximately flat compared to prior year.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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grayfox
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Re: International Dividends Got Crushed in Q2 2020

Post by grayfox » Fri Jul 03, 2020 8:10 am

jebmke wrote:
Thu Jul 02, 2020 8:36 am
grayfox wrote:
Thu Jul 02, 2020 6:51 am
The surprising things is that in Q2, U.S. distributions were actually above the previous year! How did that happen?
I have wondered the same thing. My theory (with no evidence) is that there are some timing differences is dividends payouts between Q1 and Q2. Q1 was down from prior year so YTD, the total US market dividend is approximately flat compared to prior year.
That sounds plausible.

Another thing I'm thinking is that due to the lockdown most the companies that were crushed were the little guys who are not public companies. Your little mom and pop restaurant or neighborhood shoe store was forced to remain closed under threat of arrest. Meanwhile, the big companies like McDonalds, Walmart, and Home Depot were getting all the business that the little guys had. McDonald's drive-thru has been working nonstop. If you need shoes you could only go to Walmart. Local hardware store forced to close, but Home Depot allowed to stay open.

The big guys which are public companies are benefiting from the lockdowns. They will probably show record sales and profit.
Sic transit gloria mundi. [STGM]

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