Soaring oil and gas profits drove global dividends to a record $1.56trn in 2022, an 8.4% increase on the previous year, according to Janus Henderson’s Global Dividend Index.
Surging energy prices saw the sector increase its payouts by two thirds across the year, contributing to a quarter of the overall rise. Meanwhile, financials made up another quarter of dividend growth, while a fall in commodity prices saw mining pay outs climb down from their 2021 record.
Twelve countries recorded their highest ever year of payouts to investors, including the US, China and Brazil. Globally, 88% of firms raised or held their dividend.
From a UK perspective, dividends rose 12.1% – with the banking sector the main driver of growth.
Janus Henderson portfolio manager Jane Shoemake said: “Despite rampant inflation, interest rate hikes, war and asset price declines in 2022, global dividends continued to grow, highlighting their importance to investors all round the world.
“Global dividends have completely caught up after the pandemic, with pay-outs back to their historic trend. This is an amazing achievement given the extent of economic disruption caused by Covid.”
Elsewhere, dividends in emerging markets, Asia-Pacific ex Japan and Europe increased by around a fifth.
US dividend growth was below average when compared to the rest of the world, due to its lower exposure to the big sector trends of the year, coupled with the resilience of the US economy during Covid.
Dividend growth likely to slow in 2023
For the year ahead, Janus Henderson predicts growth will slow to 2.3%. Shoemake said the extent of further interest rate rises, inflation and geopolitical risks all contribute to an uncertain outlook for payouts over the next year.
She added: “Corporate cash flow will come under pressure both from lower levels of demand and from the higher cost of servicing loans, limiting the scope for dividend growth. From a sector perspective, energy dividends are unlikely to repeat the sharp increases of 2022, while mining payouts will be dependent on underlying commodity process. That said, the re-opening of China is likely to boost economic growth once the current wave of Covid-19 infections passes.
“Among financials, banks may benefit from wider margins, thanks to the higher interest rate environment, so further dividend growth is certainly possible, subject to prudent planning for rising levels of bad loans as economic growth slows.
“Crucially, dividends are much less volatile than profits, while global dividend cover is currently high. So, despite all the uncertainties, we think further dividend growth is achievable in 2023.”
See also: Oil companies star as dividends surpass third-quarter record
