Global dividends rose to a record $1.66 trillion in 2023, up by 5.0% on an underlying basis, according to the latest Janus Henderson Global Dividend Index. The fourth quarter of 2023 was particularly encouraging, with dividends rising by 7.2% on an underlying basis.
Globally, 86% of companies either increased dividends or held them steady, although large cuts from five companies – BHP, Petrobras, Rio Tinto, Intel and AT&T – reduced the global underlying growth rate for the year by two percentage points, masking encouraging broad-based growth in many parts of the world.
Banks were the key driver of dividend growth
The banking sector delivered record payouts in 2023 and contributed almost half of the world’s dividend growth, as the higher interest rate environment enabled many banks to increase their margins. Emerging market banks made a particularly large contribution to the increase, though those in China did not participate in the banking-sector’s dividend boom.
The positive impact from higher banking dividends offset cuts from the mining sector, whose profits have fallen in tandem with lower commodity prices. Beyond these two sectors, Janus Henderson’s Index identified encouraging growth from industries as varied as vehicles, utilities, software, food, and engineering, demonstrating the importance of diversified portfolios.
Dividends in the UK rose 5.4%
UK dividends rose 5.4% on an underlying basis, with 83% of companies choosing to either increase dividends or hold them steady. The banking sector made the largest contribution to growth, driven specifically by HSBC which returned to a quarterly payment schedule and made the largest dividend increase in the world – up by $5.1bn – in 2023.
22 countries saw record payouts, with Europe ex UK and Japan as key drivers of global dividend growth
From a geographical perspective, the US, France, Germany, Italy, Canada, Mexico and Indonesia were amongst the 22 countries to see record payouts in 2023. Europe ex UK was a key growth driver during the year, contributing two-fifths of the global increase. Payouts from the region rose 10.4% on an underlying basis to a record $300.7bn. Japan was also a major contributor, with 91% of companies either raising payouts or holding them steady. In terms of size, the US made the most significant contribution to global dividend growth, although its 5.1% underlying growth was merely in line with the global average.
Emerging markets delivered record dividends
Emerging markets delivered record dividends for the third year running with payouts of $166.1bn, up 8.0% on a headline basis. Overall, however, emerging market dividends were flat on an underlying basis, as steep cuts in Brazil and lacklustre growth in China offset strong banking payouts.
2024 forecast
Janus Henderson expects 2024 to show similar underlying growth to 2023, even if a likely fall in one-off special dividends reduces the headline growth rate. Janus Henderson forecasts dividends of $1.72 trillion for 2024, up 3.9% on a headline basis and equivalent to underlying growth of 5.0%.
Ben Lofthouse, Head of Global Equity Income at Janus Henderson, said: “Pessimism over the global economy proved ill-founded in 2023 and although the outlook is uncertain, dividends are well supported. Corporate cash flow in most sectors has remained strong and is providing plenty of firepower for dividends and share buybacks.”
“The lagged effect of higher interest rates will continue to have an impact, with slower global economic growth anticipated and higher funding costs for companies. We are nevertheless optimistic for dividends in the year ahead: the run-rate of US dividend growth in the fourth quarter bodes well for the full year, Japanese companies have embarked on a process of returning more capital to shareholders, Asia looks likely to pick up, and dividends in Europe are well covered.”
“From a sector perspective, even though the rapid growth we have seen from banks around the world is going to slow this year, the rapid declines from the mining sector are also likely to make less of an impact. Energy prices remain firm so oil dividends are affordable and the big defensive sectors like healthcare, food and basic consumer goods should continue to make steady progress. What’s more, dividends are much less variable than profits over time.”
Andrew Jones, Portfolio Manager of the UK Responsible Income Fund, added: “In the UK, we are pleased to see the increase in dividends in the banking sector more than offset the fall from the mining sector. With a higher interest rate environment we would expect banks to remain one of the largest dividend payers going forward; the dividend yields on offer in the sector remain high, despite the fact that they are now much better covered by earnings and strong capital positions and there is still room for further dividend growth in the sector in the year ahead. It is our central case that UK economic growth will be better than downbeat forecasts, so we could also see better dividends from consumer discretionary stocks going forward as well.”
Meg Bratley
Wed 13/03/2024 09:16
Morning Brandon! I did thanks! Hope you did. The weathers pretty good here today so hoping its going to stay this way! Great thankyou 😊 All the best, Meg. Mob: +44 7428 964688
