Matt Gaden

Global dividends achieved an all-time high in the second quarter, according to the Janus Henderson Global Dividend Index. The latest report highlights a 23.0% increase in Australian dividends from the USD$7.3 billion recorded in the same quarter of 2022.

The global dividend landscape has experienced a striking uptick, with Q2 witnessing a record-breaking total of AUD$844.7bn (USD$568.1 billion), showcasing an impressive 4.9% growth on a headline basis. This surge is further underscored by underlying growth, which accelerated to a substantial 6.3% year-on-year, highlighting the resilience and vibrancy of the global economic recovery.

The 23.0% rise in Australian dividends was influenced by prominent contributions from two large companies, during a quarter which is seasonally the quietest for Australian dividends. A significant surge from Woodside Energy, along with a solid increase from Westpac more than offset a substantial reduction from mining giant Rio Tinto.

Global payouts rose to AUD$844.7bn (USD$568.1bn), up 4.9% on a headline basis. Underlying growth of 6.3%^[1] marked an acceleration compared to the first quarter and reflected Europe’s Q2 seasonal dominance – the period when most European companies make a single annual payment.

Japanese growth was strong, but US saw ongoing deceleration

Q2 is also seasonally important in Japan and dividends here rose 8.4% on an underlying basis, well ahead of the global average. Half the Japanese companies in our index delivered double-digit increases. The rate of growth in the US slowed for the sixth consecutive quarter however, decelerating to 4.6%, while in Asia-Pacific ex Japan, Hong Kong and South Korea were relative weak spots. Emerging market dividends fell.

Banks contributed half the world’s dividend growth in Q2

From a sector perspective bank dividends were strong all over the world with few exceptions. They accounted for half the global growth in Q2 as rising interest rates boosted margins and pandemic-related disruption to dividend payments finally worked its way out of the numbers. For example, in the UK total payouts were resilient in the face of lower mining dividends as HSBC returned to quarterly payments at a much higher level than seemed possible even a few months ago, while in Singapore, banks propelled the total paid to record levels.

Vehicle dividends also grew strongly, but mining payouts fell

Vehicle manufacturers accounted for one seventh of the year-on-year increase in Q2 payouts. Half of this came from German companies, but the sector was strong all over the world. Miners made the biggest negative contribution, owing to lower commodity prices, while oil payouts fell owing to cuts from Latin American producers.

Globally, 88% of companies either increased dividends or held them steady in Q2.​

2023 forecast unchanged owing to growing economic uncertainty

The second quarter was very positive, but with expectations for global economic growth slowing, Janus Henderson has made no change to its forecast for the full year. The global fund manager still expects payouts to rise 5.2% on a headline basis to a record $1.64 trillion, equivalent to underlying growth of 5.0%.

Matt Gaden, Head of Australia at Janus Henderson said: “Amidst the impressive surge in Australian dividends this past quarter, it’s essential for investors to remain mindful of the concentrated risks within our local mining and banking sectors. Diversification – not only across different industries but also across different countries – can act as a shield against the ups and downs of economic cycles, such as the volatility in commodity prices which are all too familiar for Australian investors. Given the slightly tempered economic growth outlook, Australians seeking to complement their domestic holdings with those based offshore may well enhance their ability to navigate uncertainties more effectively.”

Ben Lofthouse, Head of Global Equity income at Janus Henderson said: “Economic growth around the world is moderating as it responds to higher interest rates. Markets now expect global profits to be flat this year, after soaring to record highs in 2022, and when we speak to companies around the world, they are now more cautious about the outlook. While employment levels have remained very strong, parts of Europe have experienced technical recessions and policymakers everywhere are still intent on combatting inflation, even if it comes at the cost of output.

“We do expect dividend growth to continue, however. Most regions and sectors are delivering dividends in line with our expectations. The banking sector in particular will continue to deliver solid growth for the rest of the year, making record payments to shareholders. A weaker economic environment is typically negative for banks, but the positive effect on bank margins from the end of years of ultra-low interest rates is very powerful and is driving dividend payouts. The big banks are very tightly regulated and so enter the downturn in a strong capital position.

“One of the reassuring features of dividend income is that it is typically much less volatile than earnings. Payouts lagged behind profit growth last year and so can therefore exceed it this year.”​

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[1] Underlying figures adjust for lower special dividends, exchange rates and minor technical factors.

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