The global landscape of corporate dividends reached an unprecedented pinnacle in 2023, soaring to a staggering $1.66 trillion, according to a report unveiled on Wednesday. This remarkable milestone was driven by an exceptional surge in payouts by banks, accounting for a significant portion of the overall growth.
The quarterly Janus Henderson Global Dividend Index (JHGDI) report shed light on the widespread prevalence of dividend increases or maintenance among listed companies worldwide, with a striking 86% of entities opting for these actions. Furthermore, the report projected a continued upward trajectory, forecasting that dividend distributions would escalate further to a new high of $1.72 trillion in the current year.
Microsoft emerged as the foremost dividend payer globally in 2023, closely followed by tech giant Apple and energy behemoth Exxon Mobil. The cumulative value of corporate dividends exhibited a notable uptick from the previous year, surging from $1.57 trillion in 2022. This growth, which amounted to a robust 5%, factored in various elements such as currency fluctuations, special dividends, timing adjustments, and alterations in indices.
Ben Lofthouse, the head of global equity income at Janus Henderson, attributed this remarkable dividend growth to the robust cash flows witnessed across numerous sectors. He emphasized how this financial resilience empowered companies to allocate substantial resources toward dividends and share buybacks.
The banking sector emerged as a pivotal driver of dividend growth, buoyed by high interest rates that bolstered bank margins. Consequently, banks globally disbursed a record-breaking $220 billion to shareholders in 2023, marking a notable underlying increase of 15% from the previous year. This surge reflected a rebound following the pandemic-induced freeze on bank payouts.
However, the mining sector faced headwinds due to lower commodity prices, leading to hefty dividend cuts by prominent players such as BHP, Rio Tinto, Petrobras, Intel, and AT&T. These cuts, along with the robust growth in banking dividends, underscored the dynamic nature of dividend trends across sectors.
Despite the challenges faced by certain industries, the report highlighted encouraging growth in diverse sectors such as vehicles, utilities, software, food, and engineering. This diversification underscored the resilience and adaptability of global corporations in navigating evolving market conditions.
In essence, the record-breaking corporate dividends witnessed in 2023 exemplify the robustness of global businesses in generating value for shareholders amidst a backdrop of economic fluctuations and sector-specific challenges.
From a geographical perspective, Europe (excluding the UK) emerged as a significant driver of global dividend growth, contributing a substantial two-fifths of the overall increase. Payouts in the region surged by 10.4% on an underlying basis, reaching $300.7 billion. Meanwhile, Japan also played a notable role in bolstering global dividends, although its impact was somewhat tempered by the weakness of the yen.
While the United States, owing to its sheer size, remained the most significant contributor to global dividend growth, its growth rate of 5.1% aligned closely with the global average. However, dividends in emerging markets exhibited a comparatively muted performance, remaining flat on an underlying basis. Janus Henderson highlighted significant dividend cuts in Brazil and lackluster growth in China as contributing factors to this trend.
Looking ahead, Janus Henderson foresees another robust year for corporate dividends, projecting a further 5% growth to reach $1.72 trillion. Although the rapid ascent in bank dividends may taper off, Lofthouse expressed optimism that the impact of steep declines from the mining sector might be less pronounced. He noted that energy prices remain firm, providing support for oil dividends, while sectors like healthcare, food, and basic consumer goods are expected to continue making steady progress, serving as key pillars of stability in the dividend landscape.