By Chong Jun Wong and Stella Lim
16 March 2020

IHS Markit expects aggregate dividend payouts from airlines in APAC, under its coverage, to drop 20.7% to USD 1.4 billion in 2020 from a year ago amid stark earnings prospects over the short term. Airlines typically adhere to performance-linked dividend policies and they have been greatly hit by the coronavirus disease 2019 (COVID-19) outbreak.

The plunge in dividend payouts is mostly attributed to two big players influencing the overall dividend trajectory: Cathay Pacific Airways suspended its dividends and Singapore Airlines is expected to slash its final dividend per share by 45.5% in fiscal year (FY) 2020 compared to a year ago. China Airlines and Korean Air, which were already experiencing sluggish financial performance prior to the outbreak, are also expected to suspend their dividends over the short term.

Qantas remains the only airline with a projected increase in dividends, under IHS Markit coverage. While the Australian flag carrier signaled that the earnings before interest and tax for the second half of FY 2020 could decline at least AUD 100 million due to the impact of COVID-19 outbreak, Qantas is likely to stick to its policy of paying base dividends as it has the flexibility to distribute stable dividends amid earnings volatility. Its final dividends payout is forecast to increase by 3.8% on a per share basis from a year ago.

Uncertainties on the performance outlook of cosmetics players are increasing as they are hit from reduced inflow of Chinese tourists and resellers in South Korea and Japan. However, IHS Markit sees limited impact on dividends at this point. The cosmetic makers are employing various strategies, such as leveraging their diversified product lines and reinforcing online sales channels to mitigate the impact of reduced inflow of Chinese consumers.

We flag downside risks mainly for South Korean cosmetics players, including Amorepacific Group, Amorepacific Corp. and Clio Cosmetics, as they have a greater reliance on Chinese consumers. They are also most likely to resort to online sales as an alternative mean to reach out to Chinese consumers in face of reduced inflow of visitors. However, we are unsure about effectiveness of their online sales capacity in successfully compensating the reduced sales. Meanwhile, Japan’s Shiseido Co. and Kose Corp., as well as South Korea’s LG Household & Healthcare are expected to navigate the headwinds based on a more diverse product and customer base, and IHS Markit therefore expects them to issue either flat or higher dividend as per their dividend guidance.