Energy crisis boosts global dividends to record Q3 results

In its 36th edition, the research said underlying growth was at 10.3% and the group was now expecting global dividends to hit $1.56trn this year, an 8.9% increase on an underlying basis.

This is a 0.4 percentage points increase compared to the firm’s previous expectations three months ago, and was still firmly ahead of the 5-6% longer-term dividend growth trend.

The upgraded forecast was mainly drive by higher one-off special dividends, strength in the oil sector and in Asia, the report stated.

The report identified surging global oil prices as a key driver to Q3’s record highs.

Oil producer headline dividends rose by 75.1% to a record $46.4bn, “overwhelmingly” driving Q3 growth, offsetting falling mining sector pay-outs.

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Analysts at Janus Henderson said oil companies all over the world hiked pay-outs, largely via special dividends rather than an increase in their regular payments. Oil dividends were strong in emerging markets, Asia and North America, with the biggest increase coming from Petrobras in Brazil.

They said: “Indeed, without the positive impact from this sector, the global total would have barely risen in the third quarter.”

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 pay-outs from the sector are nevertheless very high by comparison to history.”

She said: “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 pay-outs is unlikely to be permanent.”

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UK companies also had a strong quarter, with 84% of businesses either raising dividends or held them steady.

Overall, UK dividends rose by 2.5% on an underlying basis in Q3. The poor exchange rate between sterling and the US dollar during September and October caused a headline decline of 6.4%, but the impact of this was limited, given that two fifths of UK dividends are declared in dollars by larger-cap stocks headquartered in London.

Many of the UK’s big dividend players are in the banking and oil sectors and were strong enough to hold up the decline in mining dividends, which were down by a third on a headline basis.

Moving into 2023, Shoemake said: “A 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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