Companies pay record dividends in the third quarter

The Janus Henderson Global Dividend Index reveals oil majors contributed to high global payouts.

Global dividends stood at a record $415.9bn in the third quarter as surging oil prices and a growing commitment to payouts in the US bolstered income returns, according to the Janus Henderson Global Dividend Index.

The strong quarter means that the report’s outlook for the year has been revised higher, with a total of $1.56trn expected to be paid out in 2022 – $30bn more than previously estimated and 8.3% ahead of last year.

In the three months from June to September, the amount paid out by oil producers rose to $46.4bn, a 75.1% increase on the previous year, as companies gave shareholders one-off special dividends.

The specials are regarded as preferable when companies make supernormal profits over increasing regular dividends as these may not be sustainable in the future.

Oil dividends were particularly strong in emerging markets, Asia and North America, with the biggest increase coming from Petrobras in Brazil.

The sector was responsible for most of the increase in total payouts: without it, the global total would have barely risen in the third quarter, the report found. It also offset a fall in pay-outs from mining stocks.

Jane Shoemake, client portfolio manager for global equity income at Janus Henderson, said: “The surge in oil dividends has coincided with reductions from the miners, though payouts from the sector are nevertheless very high by comparison with history.

“Like other commodities, energy prices are cyclical, and the oil price is already lower than levels reached earlier this year, so the current exceptional level of payouts is unlikely to be permanent.”


Source: Janus Henderson Global Dividend Index

Turning to geographies, dividends from UK companies rose 2.5% on an underlying basis in the three months from July to September, although the depreciation of sterling during this time meant they were down 6.4% overall. Some 84% of listed businesses raised or held their payouts.

“The currency effect was limited, given that two-fifths of UK dividends are declared in dollars by large multinationals headquartered in London,” the report noted.

Elsewhere, Taiwan, the US, Hong Kong and Canada were the most important contributors to growth. Taiwanese companies paid out a total of $29.6bn, with underlying dividends almost double those of the previous year, while the headline $164.2bn from US stocks was also a new record, up 11.7%, but was boosted significantly by $7.7bn in one-off special dividends.

Canadian dividends also reached a new record, up 13.2% on an underlying basis, boosted by oil producers and banks.


Source: Janus Henderson Global Dividend Index

It was not all good news, however. The third quarter is usually a muted one for European stocks, which concentrate their payouts in the second quarter. But even so, headline dividends dropped 10.1% to $18.2bn in the three months from June to September on the back of fewer one-off special dividends and weaker European currencies.

Underlying growth was 10.2%, however, and 96% of European companies increased their regular dividends or held them steady.

Payouts from companies in China disappointed, with growth of 6.7% lagging the rest of the world, while one-third of stocks cut their dividends in the quarter. This trend was led by the Chinese real estate sector, which was hit by a severe downturn.

Shoemake said: “Moving into 2023, slower global economic growth is likely to have an impact on profits and the ability of some companies to grow payouts. But dividend cover – the relationship between a company’s earnings and its dividends – is near historic highs; this is because profitability is currently strong, while the pandemic resulted in many companies rebasing dividends to more sustainable levels.

“This may provide some support even if profits come under pressure in 2023. Crucially, dividends vary much less over the economic cycle than profits as companies seek to maintain a sustainable level of income for their investors.”

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