- Global dividends fell 0.9% to $421.9bn in Q3, but underlying growth was 0.3%
- Several large cuts impacted the figures significantly- if the two largest cutters were excluded, underlying growth was 5.3%
- In the UK, growth from banks, oil producers and utilities offset cuts from the mining sector
- US dividend growth slowed but remained robust and rapid European dividend growth continued
- Banking, utilities, vehicles and most oil companies showed strong growth; half of mining companies cut payouts
- Underlying growth forecast for 2023 increased from 5.0% to 5.3%, but lower one-off special dividends and exchange rate effects mean a slight reduction in the headline forecast from $1.64 to $1.63 trillion, +4.4% year-on-year
Global dividends fell slightly in the third quarter, down 0.9% on a headline basis, to $421.9bn, according to the latest Global Dividend Index from Janus Henderson. Underlying growth, which adjusts for one-off special dividends, exchange rates and other technical factors, was 0.3%. However, large cuts from a few big companies masked much more promising growth around the world. Globally, nine companies in ten raised payouts or held them steady, though there was wide variation across sectors and countries.
Several significant cuts impacted the figures
The largest dividend falls came from across the mining sector, where half of companies reduced payouts, and from oil producers in Brazil and Taiwan, against the wider oil-sector trend. The two biggest cuts came from Brazil’s Petrobras and Australian miner BHP – their impact was so large that removing them revealed 5.3% global underlying growth in Q3, in line with the longer-term trend. Dividends from chemicals and Asian real estate companies were also down sharply, reflecting tough economic conditions in the region.
Banking, utilities, vehicles as well as most oil companies, showed strong growth
Cuts were offset by strong banking dividends in most parts of the world (up 9.3% on an underlying basis), and by rising payouts across a wide range of other sectors, especially utilities and vehicle manufacturers.
Banks, oil companies and utilities made most important contributions to growth in UK
Growth in UK dividends was held back by sharp cuts in the mining sector, with the notable exception of Glencore. These reductions masked strong growth from the wider market with more than half the non-mining companies in our index delivering double-digit increases. Banks, oil companies and utilities made the most important contribution to growth. UK payouts rose 1.5% on an underlying basis.
Strong growth seen in Europe in Q2 continued in Q3
Europe continued to exhibit very strong growth, extending the pattern seen in its seasonally important second quarter. Payouts across the region jumped 22.9% on an underlying basis, leaving Europe comfortably on track to deliver record distributions this year.
Slow yet robust growth in the US
Elsewhere, US dividends grew at 4.5%, a healthy rate of growth albeit slower than preceding periods, and 98% of US companies either raised payouts or held them steady. However, the US was outpaced by Canada which is benefiting from strength in the banking and oil sectors.
China saw record payouts
The third quarter marks the seasonal high point for China and most of Asia Pacific (excluding Japan). Chinese dividends reached a new record thanks to a large increase from Petrochina, but this masked weakness among China’s banks and property companies. A fall in Taiwanese payouts by one sixth reflected difficulties in the oil, chemicals, steel and insurance sectors, whilst a similar fall in Australia was driven by a large decline in mining payouts. Growth in Hong Kong was held back by the property sector, where every company either reduced its dividend or held it steady. Only Singapore showed real strength in the region.
Among emerging markets more broadly, there was a wide dispersion – China, India, Saudi Arabia, and Czechia were strong, but weakness in Brazil meant payouts were down for emerging markets as a whole.
End-of-year forecast: underlying growth upgraded, headline growth trimmed back a touch
Janus Henderson’s forecast for this year has reduced slightly, reflecting lower special dividends and the strengthening dollar. The 2023 headline forecast drops from $1.64 trillion to $1.63 trillion, meaning payouts will rise 4.4% year-on-year. Underlying growth, however, which is unaffected by exchange rates and one-off special dividends, is stronger than expected. Moreover, several countries, including the US, France, Canada, Switzerland and China are on track to deliver record payouts. Janus Henderson is therefore upgrading its forecast for underlying growth from 5.0% to 5.3%.
Ben Lofthouse, head of global equity income at Janus Henderson, said: “Apparent weakness in Q3’s global dividends is not a cause for concern, given the large impact a handful of companies made. In fact, the level and quality of growth look better this year than seemed likely a few months ago as payouts have become less reliant on one-off special dividends and volatile exchange rates.
“Dividend growth from companies generally remains strong across a wide range of sectors and regions, with the exception of commodity-related sectors, such as mining and chemicals. It is quite common and well-understood by investors that commodity dividends will rise and fall with the cycle, however, so this weakness does not suggest wider malaise. Moreover, our figures show that a globally diversified income portfolio has natural stabilisers – sectors in the ascendance, such as banking and oil, have been able to counteract those with declining dividends.”
