UK banks are biggest boost as global dividends break records

HSBC Holdings (LSE:HSBA) ranked as the world’s biggest dividend payer during the most recent quarter as global income investors enjoyed a bumper period for distributions.

Janus Henderson’s Global Dividend Index for the quarter to 30 June showed payouts rose 5.8% on a headline basis to a record of $606.1 billion (£463.1 billion).

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Underlying growth was even stronger at 8.2% once the drag caused by exchange rates, especially the weak Japanese yen, was taken into account.

The UK’s headline growth rate of 13.8% to $36.7 billion (£28 billion) was driven by the special dividend paid by HSBC as it shared proceeds from the sale of its Canadian business.

Even without this large one-off, the UK’s banks were the most important driver of UK dividend growth in the second quarter.

On an underlying basis excluding special dividends and currency movements, UK growth slowed to 0.7% because of steep cuts in the mining sector – in particular from Glencore (LSE:GLEN).

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Excluding the commodity firms, underlying growth was 8.6 percentage points higher, showing just how significant the impact of that one sector has been.

Globally, banks were the most important driver of higher payouts as they accounted for one-third of the underlying increase year-on-year.

One-third of sectors delivered double-digit underlying growth, while only mining, shipping and chemicals saw a decline.

A special dividend of 21 US cents in addition to a quarterly award of 10 US cents meant HSBC shareholders got the equivalent of 24.34p a share or £4.6 billion on 21 June.

This helped HSBC overtake Nestle SA (SIX:NESN) as the world’s biggest dividend payer, with China Mobile Ltd (SEHK:941), Mercedes-Benz Group AG (XETRA:MBG) and Allianz SE (XETRA:ALV) occupying the next three positions.

Rio Tinto Registered Shares (LSE:RIO) was the other UK-listed stock in the top 20, having paid its 2023 full-year dividend of 258 US cents a share in mid-April. It ranked 12th for the second year in row, having been a top-three company in each of the previous four years.

Companies paying their first dividends ever this year, including Google and Facebook owners Alphabet Inc Class A (NASDAQ:GOOGL) and Meta Platforms Inc Class A (NASDAQ:META) respectively, also boosted the global total.

Their dividends are small compared to their profits but still amounted to a hefty $3.8 billion (£2.9 billion), lifting the US underlying total by 3.6 percentage points.

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US companies paid their shareholders $161.5 billion in dividends in the second quarter, up by 8.6% on an underlying basis. The lowest level of special dividends in three years meant headline growth was slower, although at 7.1% it was still ahead of the global average.

The second quarter typically marks Europe’s seasonal high point for dividends, with the total of $204.6 billion (£156.4 billion) a record for the region as payouts jumped 7.7% year-on-year. France, Italy, Switzerland and Spain all saw record dividends.

The quarter is also seasonally important in Japan as payments soared by one-seventh on an underlying basis to a new yen record, but the weak exchange rate meant the period did not surpass previous dollar highs.

The second-quarter performance and contribution of new payments, including China’s Alibaba Group Holding Ltd ADR (NYSE:BABA), means Janus Henderson now expects companies around the world to distribute $1.74 trillion (£1.33 trillion) in 2024, up 6.4% compared to 2023 on an underlying basis.