Global company dividends rose to a record $1.66 trillion in 2023, up 5% on an underlying basis, according to the latest Janus Henderson Global Dividend Index.
The year ended on a particularly positive note, with Q4 dividends rising 7.2% on an underlying basis, thanks to strength in Europe, the UK and Japan.
Janus Henderson said 22 countries saw record payouts, with Europe ex UK and Japan as key drivers of global dividend growth.
The US, France, Germany, Italy, Canada, Mexico and Indonesia were just a handful of the 22 countries to see record payouts in 2023.
Europe ex UK contributed two-fifths of the global increase. Payouts from the region rose 10.4% on an underlying basis to a record $300.7 billion total.
“Japan was also a major contributor, though the weak yen masked some of the strength shown across 91% of its companies,” said Janus Henderson.
“Although its large size meant the US made the most significant contribution to global dividend growth, its 5.1% underlying growth rate was simply in line with the global average.”
The banking sector delivered record payouts in 2023 and contributed half the world’s dividend growth, as the higher interest rate environment enabled many banks to increase their margins.
Emerging market banks made a particularly large contribution to the increase, though banks in China did not participate in the banking-sector’s dividend boom.
“The positive impact from higher banking dividends was almost entirely offset by cuts from the mining sector, whose profits have fallen in tandem with lower commodity prices,” said Janus Henderson.
“Beyond these two sectors, whose impact was unusually large, Janus Henderson’s index identified encouraging growth from industries as varied as vehicles, utilities, software, food, and engineering, demonstrating the importance of having a diversified portfolio.”
Stronger European currencies, and large special dividends from Volkswagen, Equinor and Moller-Maersk among others, boosted the headline dividend growth rate to 17.6%.
Even the underlying growth of 10.4% was still more than twice the global average. The $300.7bn total broke records for the second year running, with all-time highs recorded in France, Germany, Switzerland, Italy, Norway, Denmark and Austria.
Three tenths of the growth in Europe came from banks alone, but there was a strong contribution from a range of sectors including industrials, vehicles, oil producers and healthcare. 84% of European companies either raised payouts or held them steady in 2023.
French dividends jumped to a record $68.7 billion, an increase of 10.3% on an underlying basis, with 97% of companies either raising payouts or holding them steady, well above the global and European average and exceeding the US.
The biggest contribution to growth by far came from power utility Engie, which paid its largest dividend in a decade and accounted for one quarter of the increase in French payouts.
Meanwhile, one third of the growth in France came from consumer companies like L’Oreal and Hermes, and another quarter from industrials like aerospace group Safran and engineering company Vinci.
German dividend growth closely matched France’s at 9.6% on an underlying basis. The total $56.6 billion distributed was almost a third higher in euro terms than the previous record set in 2018 and was boosted by Volkswagen’s $6. billion special dividend from the proceeds of spinning off Porsche.
Swiss dividends rose to a new record of $48 billion.
“Half of Swiss dividends are paid by just three companies – Roche, Novartis and Nestle – and these grew their per-share payouts only slowly, masking much more rapid growth from mid-tier companies such as freight company Kuhne & Nagel, cement maker Holcim and luxury goods producer Richemont,” said the report.
Globally, 86% of companies either increased dividends or held them steady but large cuts from just five companies — BHP, Petrobras, Rio Tinto, Intel and AT&T — reduced the global underlying growth rate for the year by two percentage points.
Janus Henderson expects 2024 to show similar underlying growth to 2023, even if a likely fall in one-off special dividends reduces the headline growth rate.
Janus Henderson forecasts dividends of $1.72 trillion for 2024, up 3.9% on a headline basis, equivalent to underlying growth of 5.0%.
Ben Lofthouse, Head of Global Equity income at Janus Henderson, said: “Pessimism over the global economy proved ill-founded in 2023 and although the outlook is uncertain, dividends are well supported.
“Corporate cash flow in most sectors has remained strong and is providing plenty of firepower for dividends and share buybacks.”
“The lagged effect of higher interest rates will continue to have an impact, with slower global economic growth anticipated and higher funding costs for companies.
“We are nevertheless optimistic for dividends in the year ahead. The run-rate of US dividend growth in the fourth quarter bodes well for the full year, Japanese companies have embarked on a process of returning more capital to shareholders, Asia looks likely to pick up, and dividends in Europe are well covered.”
“From a sector perspective, even though the rapid growth we have seen from banks around the world is going to slow this year, the rapid declines from the mining sector are also likely to make less of an impact.
“Energy prices remain firm so oil dividends are affordable and the big defensive sectors like healthcare, food and basic consumer goods should continue to make steady progress. What’s more, dividends are much less variable than profits over time.”