Oil companies star as dividends surpass third-quarter record

Surging oil dividends drove global pay-outs to £350bn for Q3, the third quarterly record in succession this year

Oil majors offside with investors worth $10trn


Booming oil profits, largely driven by the energy crisis, have led to record third-quarterly global dividend pay-outs, with payments reaching $415.9bn (£350.1bn) in Q3, according to the Janus Henderson Global Dividend Index.

The increase was driven by the booming oil sector, with the report stating that dividends from there jumped by three-quarters, to $46.4bn (£38.9bn), from the same period last year. In fact, the report found that, without the $19.9bn (£16.7bn) increase in dividend payments from the oil sector, the global total would have been flat year-on-year.

Oil companies from Brazil, Hong Kong, the US and Canada were at the forefront of this boom, with Brazilian giant Petrobras posting the biggest growth in its dividend in Q3.

In all, headline dividend growth hit 7%, and underlying growth exceeded 10% once the impact of the US dollar’s strength was taken into account.

So far, each quarter of 2022 has broken its respective quarterly record for dividend pay-outs; the figure for Q2 hit $544.8bn (£456.3bn), a headline increase of 11% year-on-year, with a similar rate of increase being posted in the first quarter.

According to Jane Shoemake, a portfolio manager at Janus Henderson, the picture remains strong for global dividends and even the mining sector, where dividends have fallen as a result of lower commodity prices, is likely to finish the year 70% higher than its previous record in 2019, .

North America made up 44% of the total dividends distributed for Q3, while Taiwan and Hong Kong also performed strongly. In contrast, Australia was hit by the drop in mining dividends, experiencing a 13% underlying decline for the quarter.

Globally, 90% of companies raised dividends or held them steady – marginally below the 94% recorded in the first half of the year. Nevertheless, Janus Henderson has upgraded its forecast for the year’s pay-outs, predicting a total of $1.56trn (£1.31trn) in global dividends this year, up 8.9% on an underlying basis.

Shoemake, who focuses on 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 still very high historically. 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.

“Moving into 2023, slower global economic growth is likely to have an impact on profits and the ability of some companies to grow pay-outs. 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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