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Global dividends hit record as European equities and banks lead the way

Total payouts rose 4.9% on a headline basis, according to research from Janus Henderson.
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Global dividends hit a new record of $568.1bn in the second quarter of 2023, according to the latest iteration of the Janus Henderson Global Dividend Index.

Total payouts rose 4.9% on a headline basis versus a year ago and were up 6.3% on an underlying basis. Close to nine in 10 companies (88%) either increased or held their dividends steady in the quarter.

Beneath the headline figures there were a number of notable trends. Chief among these was the relative strength of European equities.

The Europe ex-UK category saw record dividends of $184.5bn and exceeded other regions, with 10% growth on an annual basis. The figure was in part a reflection of the fact that most European companies make a single annual payment in the second quarter each year however. 

Banks were also strong performers. They contributed half the world’s dividend growth in Q2 and drove a quarter of European dividend growth. 

Janus Henderson noted rising interest rates boosted banks’ margins and pandemic-related disruption to dividend payments has ‘finally worked its way out of the numbers’. 

A sharp downturn in mining company payouts was a notable low point, hitting UK equities in particular. 

This was driven by fewer large one-off special dividends and more reductions in regular payouts. This meant the the headline total paid in the UK fell 12.1% in the second quarter to $30.7bn. 

The underlying growth rate for the UK as a whole remained modestly positive at 2.9%, but this was mainly thanks to the banks. 

Despite the strong overall growth in the second quarter, expectations of a slowdown in the global economy meant Janus Henderson maintained its forecast for the full year. The firm still expects total annual payouts to rise 5.2% on a headline basis to a record $1.6trn. This is equivalent to underlying growth of 5%.

Ben Lofthouse, head of global equity income at Janus Henderson, commented: “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,” Lofthouse continued. “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.”

This story first appeared on our sister publication, Portfolio Adviser.

Part of the Mark Allen Group.