A strong outlook for 2024 dividends is predicted after a record 2023 when companies paid out $1.66 trillion globally on an underlying basis.
Dividends this year could surpass that and reach $1.72 trillion, according to fund manager Janus Henderson.
Dividend growth in 2023 was 5% on an underlying basis, according to the firm’s Global Dividend Index, with Q4 showing a 7.2% rise.
Globally, 86% of companies either increased dividends or held them steady, although five companies – BHP, Petrobras, Rio Tinto, Intel and AT&T – made large cuts.
The cuts, which reduced the global underlying growth rate for the year by two percentage points, masked “encouraging broad-based growth in many parts of the world”, said the firm.
Banks were the key driver of dividend growth, delivering record payouts in 2023 and contributed almost half of the world’s dividend growth. Higher interest rates enabled many banks to increase their margins.
Emerging market banks made a “particularly large” contribution to the increase, though those in China did not participate in the banking-sector’s dividend boom.
Miners dragged overall figures, but Janus Henderson’s Index identified encouraging growth from industries as varied as vehicles, utilities, software, food, and engineering, which the firm said demonstrated the importance of diversified portfolios.
Twenty-two countries saw record payouts, with Europe (ex-UK) and Japan as key drivers. Dividends in the UK rose 5.4%, while records were set in France, Germany, Italy, among other countries.
Europe ex UK was a key growth driver during the year, contributing two-fifths of the global increase. Payouts from the region rose 10.4% on an underlying basis to a record $300.7 billion.
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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.”
