Australian investors witnessed record dividend payouts in the past year, largely from the mining and banking sector, according to the Janus Henderson Global Dividend Index.
Dividends hit $97.7 billion in 2022, a record in Australian dollar terms, though they did not surpass their 2021 US dollar peak. Global dividends rose 8.4% to a record US$1.56 trillion.
After adjusting for the US dollar’s rise against most currencies, as well as lower special dividends and other technical factors, underlying growth stood at 13.9%.
“Global dividends have completely caught up after the pandemic, with payouts back to their historic trend,” observed Jane Shoemake, client portfolio manager for global equity income, Janus Henderson.
“This is an amazing achievement given the extent of economic disruption caused by COVID-19.”
Globally, financials and oil & gas producers accounted for half of global dividend growth with the latter bolstered by soaring energy prices.
In Australia, the banking and mining sectors accounted for more than three quarters of dividends paid out. BHP grew its total by 8.0% year-on-year thanks in part to strong coal prices and despite the full demerger of its stake in Woodside Petroleum.
Australia’s banks grew their payouts by 5.9% over the year.
Emerging markets, Asia-Pacific ex Japan and Europe all saw dividends rise by around a fifth. US growth was less than half the rest of the world, attributed to lower exposure to big sector trends in 2022, though it was above its long-run average.
Still, there remained some uncertainty over the prospects for dividends for the year ahead, Shoemake noted.
“Inflation, the extent of further rate hikes, and geopolitical risks all cloud the horizon,” she said.
“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.”
For 2023, Janus Henderson forecast dividend growth would slow to 2.3% on a headline basis, equivalent to an underlying increase of 3.4%. This would bring the global total to USD$1.60 trillion.
