In a testament to the resilience of corporate economies worldwide, global corporate dividends soared to an unprecedented high of $1.66 trillion in 2023, according to a report released on Wednesday. The surge was propelled by remarkable payouts from banks, accounting for half of the overall growth, as revealed by the quarterly Janus Henderson Global Dividend Index (JHGDI) report.
The report highlighted that an impressive 86% of listed companies globally either increased dividends or maintained their payout levels, underscoring the robustness of corporate finances even amidst challenging economic conditions. Projections from the report indicate that dividend payouts are poised to climb further, hitting a new pinnacle of $1.72 trillion this year.
Among the leading dividend distributors in 2023 were tech giant Microsoft, closely followed by Apple and energy titan Exxon Mobil, reflecting the diverse sectors contributing to this global financial milestone.
Ben Lofthouse, head of global equity income at Janus Henderson, attributed the surge in dividends to strong corporate cash flows across various sectors, providing ample ammunition for both dividends and share buybacks. He noted that high interest rates had bolstered bank margins, resulting in record payouts of $220 billion to shareholders in 2023, marking a remarkable 15% increase from the previous year.
However, while the banking sector enjoyed unprecedented growth, the mining industry faced headwinds due to lower commodity prices, leading to significant dividend cuts by prominent players such as BHP, Rio Tinto, and Petrobras, among others. These cuts, along with reductions from companies like Intel and AT&T, tempered the overall dividend growth rate for 2023.
Despite these challenges, the report highlighted encouraging growth across diverse industries such as vehicles, utilities, software, food, and engineering, underlining the importance of a diversified investment portfolio.
Geographically, Europe (excluding the UK) emerged as a key driver of dividend growth, contributing two-fifths of the global increase with a robust 10.4% rise in payouts. Japan also made significant strides, albeit somewhat tempered by currency fluctuations.
In contrast, emerging markets dividends remained flat on an underlying basis, with Brazil witnessing steep cuts and China experiencing lackluster growth. Looking ahead, Janus Henderson anticipates another 5% growth in corporate dividends this year, reaching an estimated $1.72 trillion.
Despite expectations of a slowdown in the rapid increase of bank dividends and potential declines in the mining sector, Lofthouse expressed confidence in the resilience of sectors like healthcare, food, and basic consumer goods, foreseeing steady progress fueled by firm energy prices and ongoing economic stability. As corporations navigate evolving economic landscapes, the outlook for global dividends remains promising, paving the way for sustained growth and shareholder returns in the years ahead.
