Global dividends grew strongly in 2022, according to the Janus Henderson Global Dividend Index. They rose 8.4% to a record $1.56 trillion, matching Janus Henderson’s forecast.
After adjusting for the dollar’s rise against most currencies, as well as lower special dividends and other technical factors, underlying growth was even stronger at 13.9%.
Twelve countries saw record payoutsGlobal dividend growth was so strong that twelve countries saw record payouts in dollar terms. These included the US, Canada, Brazil, China, India and Taiwan, but a number of others posted records in their local currencies, including France, Germany, Japan and Australia.
Oil & gas producers and financials accounted for half of global dividend growth in 2022. They contributed almost one quarter of 2022’s increase in global dividends. Payouts were increased almost everywhere with emerging market companies showing the strongest growth.Last year’s dividend picture emerges most clearly when viewed through the lens of sector trends. Soaring energy prices meant oil & gas producers raised payouts by two thirds in a mixture of regular distributions and one-off special dividends
Banks and other financials, especially in the US, UK and Europe, contributed another quarter of the year’s growth, building on the strong dividend recovery from the pandemic that the sector enjoyed in 2021. Elsewhere, sky-high freight costs boosted transport companies around the world, while soaring demand and higher prices for cars and luxury goods meant these sectors were the most important drivers of dividend growth in Europe. Lower commodity prices, by contrast, meant mining payouts fell from their record 2021 high point.
Despite some clear sector winners, growth was nevertheless broadly based – globally 88% of companies raised dividends or held them steady.
Dividend growth in emerging markets, Asia-Pacific ex Japan and EuropeFrom a geographical perspective, dividends in emerging markets, Asia-Pacific ex Japan and Europe rose by around a fifth on an underlying basis. Growth in the US was less than half the rest of the world, mainly because the US has lower exposure to some of 2022’s big sector trends, but also because US dividends were very resilient during the pandemic and so have had a less dramatic recovery. US growth was nevertheless above its long-run average. Headline growth in Japan was dramatically impacted by the weak yen, but dividends rose by a sixth on an underlying basis.
UK dividends rose 12.1%on an underlying basis
UK dividends rose 12.1% on an underlying basis. Resurgent banking dividends were the main driver of growth, but the rise in oil payouts was also a significant contributor, as was the restart of BT’s dividend. The large mining sector saw payouts dip very slightly on a headline basis. 92% of UK companies raised dividends or held them steady.
Compared to a strong Q4 2021, fourth quarter growth was still 7.8% higherBy the fourth quarter, global dividend growth had slowed to 7.8% on an underlying basis. However, this was still a strong result given Q4 2021 was boosted by catch-up payments from cuts made during the pandemic, especially in Europe, making it a tough comparator. There were also signs that higher interest rates may have begun to impact on companies’ willingness to grow dividends – in the US, for example, growth in the fourth quarter slowed to 5.5%.
However, the future path of economic growth, inflation and the extent of further rate hikes, as well as geopolitical risks, add to uncertainty over the outlook for dividends this year. Janus Henderson forecasts slower growth in 2023, with payments of $1.60 trillion, up 2.3% on a headline basis, equivalent to an underlying increase of 3.4%.Jane Shoemake, Client Portfolio Manager for global equity income said: “Despite rampant inflation, interest-rate hikes, war and asset price declines in 2022, global dividends continued to grow, highlighting their importance to investors all round the world. Global dividends have completely caught up after the pandemic, with payouts back to their historic trend. This is an amazing achievement given the extent of economic disruption caused by Covid-19.
For the year ahead, there is more uncertainty over the prospects for dividends. Inflation, the extent of further rate hikes, and geopolitical risks all cloud the horizon. Corporate cash flow will come under pressure both from lower levels of demand and from the higher cost of servicing loans, limiting the scope for dividend growth. From a sector perspective, energy dividends are unlikely to repeat the sharp increases of 2022, while mining payouts will be dependent on underlying commodity process. That said, the re-opening of China is likely to boost economic growth once the current wave of Covid-19 infections passes. Among financials, banks may benefit from wider margins, thanks to the higher interest rate environment, so further dividend growth is certainly possible, subject to prudent planning for rising levels of bad loans as economic growth slows.
Crucially, dividends are much less volatile than profits, while global dividend cover (the relationship between profits and dividends) is currently high. So, despite all the uncertainties, we think further dividend growth is achievable in 2023.”