Despite still-high (though easing) inflation, high interest rates, high house prices, and weak consumer spending and confidence, the globe's corporations managed to rack up an all-time high in dividends in 2023.
The quarterly survey of the globe's top 1,200 listed companies in the Janus Henderson Global Dividend Index (JHGDI) showed corporate dividends globally hit an all-time high of $US1.66 trillion in 2023, with record payouts by banks making up half of the growth.
Bank dividends surged in 2023, but that was also offset by a slide in payouts from global mining giants like BHP, Rio Tinto, Fortescue, Anglo American, and Vale.
The rise over the year to a record level was despite a 0.9% dip in the third quarter of last year. That saw the forecast for the year trimmed to $US1.63 trillion but instead, that was beaten by the eventual outcome of a record $US1.66 trillion.
That figure, at current exchange rates, is equal to just over $A2.5 trillion, which is more than the GDP of Australia in 2022-23 of $A2.25 trillion.
Worldwide, the survey shows that 86% of listed companies either increased dividends or maintained them.
Janus Henderson also forecast that dividend payouts would hit a new record of $US1.72 trillion this year.
The world's biggest dividend payers in 2023 were Microsoft, followed by Apple and Exxon Mobil.
The total value of corporate dividends rose from $1.57 trillion in 2022 with underlying growth – which accounts for currency movements, special dividends, timing changes, and index changes – of 5% from 2022, Janus Henderson, a leading UK asset manager said in commentary with the survey.
"Corporate cash flow in most sectors remained strong and this provided plenty of firepower for dividends and share buybacks," said Ben Lofthouse, head of global equity income at Janus Henderson.
The high-interest rates boosted bank profit margins (as measured by their Net Interest Margins or NIMs) and saw them payout a record $US220 billion to shareholders in 2023, an underlying rise of 15% from 2022 and continuing the rebound after bank payouts were frozen during the pandemic.
"In addition, lingering post-pandemic catch-up effects meant payouts were fully restored, most notably at HSBC," Janus Henderson's report added.
"Emerging market banks made a particularly strong contribution to the increase, though those in China did not participate in the banking-sector’s dividend boom.”
But Janus Henderson said that any positive impact from higher banking dividends was almost entirely offset by cuts from the mining sector, the report found, as lower commodity prices weighed on mining profits.
Hefty dividend cuts by five prominent companies – miners BHP and Rio Tinto as well as Petrobras, Intel, and AT&T – reduced the underlying 2023 global dividend growth rate by 2 percentage points.
"Beyond these two sectors (banking and mining), whose impact was unusually large, we saw encouraging growth from industries as varied as vehicles, utilities, software, food, and engineering, demonstrating the importance of a diversified portfolio," the report said.
On a geographical basis, Europe (excluding the UK) was a key growth driver, contributing two-fifths of the global increase as payouts rose 10.4% on an underlying basis to $300.7 billion.
Japan was also a major contributor, though it was somewhat tempered by a weak yen, the report said.
While the United States made the most significant contribution to global dividend growth due to its size, a 5.1% growth rate was in line with the global average.
Emerging markets dividends were flat on an underlying basis, with Janus Henderson highlighting steep cuts in Brazil and lackluster growth in China.
Even though the rapid increase in bank dividends is likely to slow, rapid declines from the mining sector might also be less impactful, said Lofthouse.
"Energy prices remain firm so oil dividends look well-supported, and the big defensive sectors like healthcare, food, and basic consumer goods should continue to make steady progress,” he added.
In a separate report, S&P Global forecast that the big UK banks will lift payments to shareholders this year and into the near future.
"Dividends at the UK's largest banks are expected to increase in 2024 and beyond, as lenders seek to boost shareholder distributions while posting strong profits and keeping costs in line.
All five of the largest UK banks — HSBC Holdings PLC, Barclays PLC, Lloyds Banking Group PLC, NatWest Group PLC, and Standard Chartered PLC — are forecast to raise dividend payouts in 2024, consensus estimates compiled by S&P Global Market Intelligence show.
"Those dividends are set to keep growing or at least hold steady in 2025 for every bank in the group except HSBC which has forecast a special one-off extra payment this year dependent on an asset sale.
"Of the big bank group, HSBC distributed the highest amount by far in 2023 at $19 billion, on the back of strong interest income growth and gains from recent acquisitions and asset sales. It paid its highest dividend since 2008, 61 cents per share, and added $7 billion in buybacks.
"We still expect to have substantial distribution capacity going forward," CEO Noel Quinn said during a Feb. 21 earnings call. HSBC has promised a special dividend of 21 cents per share upon the planned sale of HSBC's Canadian business, expected to close by the end of the first quarter,” S&P pointed out.
