Australian dividends see 23% rise in Q2 2023

With prominent contributions by Woodside and Westpac in a seasonally quiet quarter, Australian dividends reached $13.1 billion in Q2 2023, according to the Janus Henderson Global Dividend Index.

It marked a 23 per cent increase from $11.2 billion recorded in the same quarter of 2022.

In Q2 2023, global dividends were up 4.9 per cent on a headline basis, standing at a record $844.7 billion, with the surge further underscored by underlying growth, which accelerated to a substantial 6.3 per cent year-on-year. 

According to the firm, the growth reflected Europe’s Q2 seasonal dominance in a period when most European companies make a single annual payment.

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Bank dividends were strong all over the world with few exceptions, accounting for half the global growth in Q2. In Australia, prominent contributions by Westpac and Woodside more than offset a substantial reduction from mining giant Rio Tinto.

Despite this strong performance from the sector, it’s essential for investors to remain mindful of the concentrated risks within the local mining and banking sectors, said Matt Gaden, head of Australia at Janus Henderson. 

“Diversification – not only across different industries but also across different countries – can act as a shield against the ups and downs of economic cycles, such as the volatility in commodity prices which are all too familiar for Australian investors,” Gaden said.

“Given the slightly tempered economic growth outlook, Australians seeking to complement their domestic holdings with those based offshore may well enhance their ability to navigate uncertainties more effectively.”

The firm’s head of global equity income, Ben Lofthouse, noted that ​economic growth around the world is moderating as it responds to higher interest rates. 

“Markets now expect global profits to be flat this year, after soaring to record highs in 2022, and when we speak to companies around the world, they are now more cautious about the outlook,” he said. 

“While employment levels have remained very strong, parts of Europe have experienced technical recessions and policymakers everywhere are still intent on combatting inflation, even if it comes at the cost of output.”

However, he expects dividend growth to continue, with most regions and sectors delivering dividends in line with the firm’s expectations.

Lofthouse said: “The banking sector in particular will continue to deliver solid growth for the rest of the year, making record payments to shareholders. A weaker economic environment is typically negative for banks, but the positive effect on bank margins from the end of years of ultra-low interest rates is very powerful and is driving dividend payouts. The big banks are very tightly regulated and so enter the downturn in a strong capital position.

“One of the reassuring features of dividend income is that it is typically much less volatile than earnings. Payouts lagged behind profit growth last year and so can therefore exceed it this year.”