Global dividends to return to pre-pandemic levels by end of this year

In total, 90% of companies either raised their dividends or held them steady in the quarter.

Global dividend payments surged by a record 22% on an underlying basis (which strips out special dividends) in the third quarter of 2021, according to the latest Janus Henderson Global Dividend Index.

According to the latest report, dividends totalled $403.5 billion, an all-time high for a third quarter. This was owing to a strong resurgence of underlying payments, as well as strong growth in special dividends, boosting the headline payments total.

In total, 90% of companies either raised their dividends or held them steady in the quarter, a much higher number than usual.

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However, one sector was the main cause of the strength of dividend growth: mining. Thanks to soaring commodity prices, mining sector firms were able to see huge profit windfalls. Much of this was handed over to shareholders in the form of dividend payments.

According to the report, the dividend payments of mining companies rose so much that more than two-thirds of the year-on-year growth in global payouts in the third quarter came from miners. Three out of every four mining companies in the index at least doubled their payments when compared to the third quarter of 2020. BHP (LSE:BHP) will be the world’s biggest dividend payer in 2021, according to the report.

Financials also made a strong contribution, largely due to regulators lifting restrictions on payouts. During the height of the pandemic, regulators forced banks and other financials to suspend dividend payments to protect against the crisis.

When it came to regions, those that saw the steepest cuts last year also saw strong recoveries in the third quarter of 2021. The UK and Australia are two clear examples of this, however, parts of Asia and some emerging markets benefited too. Those parts of the world where dividend cuts were more limited last year, such as in the US, saw less growth than the global average. Evens so, dividends from US companies rose by a tenth to a new third-quarter record.

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With payments strong in the third quarter, Janus Henderson has upgraded its 2021 forecast. They now expect dividends to surpass the pre-pandemic peak by the end of 2021. This will mean it will have taken firms just nine months to recover from their March 2021 lows. Previously, at the height of the pandemic, many experts predicted that it would take years for dividends to recover to pre-pandemic highs.

The Janus Henderson Global Dividend Index now expects headline growth of 15.6% in 2021, with total payments at $1.46 trillion. Underlying growth is expected to reach 13.6%.