Investors reap big rewards
Last year may have been negative for equities overall, but dividend investors around the world were among the winners, with payouts rising 8.4% to $US1.56 trillion ($2.3 trillion).
The Janus Henderson dividend index found that 12 countries, including Australia, had record payouts, as 88% of companies raised dividends or held them steady.
Globally, oil and gas producers accounted for a quarter of the increase in 2022, with half coming from emerging markets. The financial sector accounted for another quarter, building on the 2021 recovery after cuts during the pandemic.
It was a record year for Australian investors in Australian dollar terms, with dividend payouts totalling $97.7 billion, but this did not surpass their 2021 US dollar peak.
Underlying growth was 9.8%, while the headline rate fell 4.9% once the exchange rate and lower special dividends from the mining sector were considered.
BHP led the charge globally, with the miner increasing its payout by 8% even after demerging its stake in Woodside Petroleum.
However, others in the sector cut dividends due to the lower price of commodities in 2022, with the likes of Fortescue Metals and Rio Tinto both slashing payouts, which dragged down growth.
Australian banks grew their payouts by 5.9%, and together with the mining sector accounted for more than three-quarters of dividends in 2022.
Jane Shoemake, Janus Henderson’s client portfolio manager, says that despite economic challenges, including war and interest rate hikes, companies had pushed ahead with dividends.
“Global dividends have completely caught up after the pandemic, with payouts back to their historic trend. This is an amazing achievement given the extent of economic disruption caused by Covid-19,” she says. Shoemake warns, however, that Janus Henderson expects dividend growth to slow from these high levels. “After a much stronger than expected recovery in dividends post the 2020 pandemic, there is more uncertainty over the prospects for dividend growth in the year ahead.”
Inflation, rate hikes and geopolitical risks cloud the horizon, but the drag from exchange rate factors should be smaller.
“This results in a forecast of $US1.60 trillion for 2023, up 2.3% on a headline basis, equivalent to an underlying increase of 3.4%,” says Shoemake.