Global dividends hit new record, but outlook uncertain for 2023

Rising payouts are helping investors weather the stock market crash this year.

Despite shaky stock markets, global dividend payouts broke records for the first three months of the year.

Fund manager Janus Henderson calculated that companies returned $302.5 billion (£240 billion) to shareholders in the first quarter, an 11% increase on the same period last year.

It said this growth was in part due to lower payouts last year following disruption caused by the pandemic, but also reflected the robust post-Covid economic rebound that took place in much of the world in 2021 and into early 2022.

Globally, 81% of companies that issued payouts in the first quarter increased their dividends year-on-year and another 13% held them steady.

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The numbers were so impressive that Janus Henderson boosted its forecast for global dividends this year. For 2022, it now expects global dividends to reach $1.54 trillion, an increase of 4.6%. It had previously forecast growth of 3.1%.

Rocketing raw material prices due to the war in Ukraine saw the mining and oil sector post the highest dividend growth. Mining payouts jumped 29.7% on a headline basis, which includes one-off dividends, and 38% when just looking at scheduled dividends. BHP (LSE:BHP) is set to be the world’s largest dividend payer in 2022 for the second year running.

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Janus Henderson says miners will continue to be a significant contributor for the rest of the year, potentially paying more than $100 billion in dividends for the first time. 

Every region reported double-digit growth, with the US, Canada and Denmark setting all-time quarterly records. US payouts rose 10.4% on an underlying basis (excluding special dividends) to a new record of $141.6 billion.

A staggering 99% of US companies in the index either raised their dividends or held them steady, up from 90% during 2021.

In the UK, payouts grew 14.2% on an underlying basis in the first quarter, although the headline total fell, due to Tesco (LSE:TSCO) paying a large special dividend in the first quarter of 2021.  

Oil companies were the main driver of the increase, but Janus Henderson reckons mining groups will begin to contribute very strongly from the second quarter.

Healthcare payouts also rose, after AstraZeneca’s first dividend hike in nearly 10 years, while the restoration of telecom operator BT (LSE:BT.A)’s distribution after a two-year pause also made a significant contribution to growth.

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However, Jane Shoemake, Janus Henderson client portfolio manager for global equity income, warned that the outlook from 2023 onwards for dividends was uncertain.

Shoemake said: “The world’s economy nevertheless faces a number of challenges – the war in Ukraine, rising geopolitical tensions, high energy and commodity prices, rapid inflation and a rising interest rate environment. The resultant downward pressure on economic growth will impact company profits in a number of sectors.”

However, she adds that it is important to remember that dividends are much less volatile than profits.

“The latter usually move dramatically over the economic cycle, but dividends tend to be much steadier. Indeed, the fact that dividends have already surpassed pre-pandemic highs is part of a longer-term narrative that highlights how dividends have proved to be a reliable source of income growth over the long term. Moreover, this growth means that dividends provide some shelter against inflation, which cash savings cannot do,” she said.