Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 552

Australia lags global dividend bonanza

2023 saw global dividends rise to a record US$1.66 trillion, up by 5% on an underlying basis. The year ended on a particularly positive note, with Q4 dividends rising 7.2%, thanks to strength in Europe, the UK and Japan. Special dividends were larger in the fourth quarter than we had forecast and this, combined with US dollar weakness, boosted the annual headline growth rate to 5.6%, ahead of our forecast. Underlying growth was in line with our expectations for the year.1

Banks stood out

The banking sector delivered record dividends in 2023 and contributed half the world’s dividend growth, as the higher interest rate environment enabled many banks to increase their margins. In addition, lingering post-pandemic catch-up effects meant payouts were fully restored, most notably at HSBC. Emerging market banks made a particularly strong contribution to the increase, though those in China did not participate in the banking-sector’s dividend boom.

The positive impact from higher banking dividends was almost entirely offset by cuts from the mining sector, whose profits have fallen in tandem with lower commodity prices.

Beyond these two sectors, whose impact was unusually large, we saw encouraging growth from industries as varied as vehicles, utilities, software, food, and engineering, demonstrating the importance of a diversified portfolio.

Globally 86% of companies either increased dividends or held them steady but large cuts from just five companies – BHP, Petrobras, Rio Tinto, Intel and AT&T – reduced the global underlying growth rate by two percentage points.

Dividends by region

From a geographical perspective, the US, France, Germany, Italy, Canada, Mexico and Indonesia were just a handful of the 22 countries to see record payouts in 2023. Although its large size meant the US made the most significant contribution to global dividend growth, its 5.1% underlying growth rate was simply in line with the global average.

Europe ex UK was a key growth driver during the year, contributing two-fifths of the global increase. Payouts from the region rose 10.4% on an underlying basis to a record US$300.7 billion total.

Japan was also a major contributor, though the weak yen masked some of the strength shown across 91% of its companies.

Despite impressive growth among many of the banks, emerging market dividends were flat on an underlying basis, thanks to steep cuts in Brazil and lacklustre growth in China.

Meanwhile, Saudi Arabia is emerging as a significant contributor to global dividends, jumping ahead of the Netherlands in 2023 in the global rankings.

UK dividend growth of 5.4% roughly matched the global average as significant increases among the banks and oil producers were largely offset by lower mining payouts.

Most developed countries in Asia-Pacific ex Japan saw lower payouts year-on-year.

Pessimism over the global economy proved ill-founded in 2023 and although the outlook is uncertain, dividends look well supported – and have historically shown significantly less variability than profits. We therefore expect 2024 to show similar underlying growth to 2023, even if a likely fall in one-off special dividends reduces the headline growth rate. We therefore forecast total dividends of $1.72 trillion for 2024, up 3.9% on a headline basis, equivalent to underlying growth of 5.0%.


JHGDI (Janus Henerson Global Dividend Index)

Headline v underlying

Our headline figures are simply the total amount paid by companies in our index, expressed in US dollars. We prefer to emphasise the underlying growth rates, which adjusts the headline change to take account of the impact of exchange rates, volatile one-off special dividends and technical factors related to dividend calendars and changes to our index.

In 2023, headline growth of 5.6% was very similar to the underlying 5.0% change. One-off special dividends, which are highly discretionary and rather unpredictable, were almost unchanged year-on-year and were stronger than we had anticipated for the year. Reductions in special dividends from the oil and mining sectors were offset by vehicle manufacturers (VW and Ford) and transport group Moller Maersk.

The US dollar weakened in the fourth quarter which boosted the dollar value of Q4 payments made in other currencies more than seemed likely at the beginning of the period. Over the course of the whole year, exchange rates made very little impact, reducing the headline growth rate by just 0.2 percentage points. Over the long term, the impact of exchange rates is minimal.

How Australia fared

Large cuts in the dominant mining sector during 2023 wiped out one fifth of Australia’s dividends and meant that collectively Australian payouts fell 10.7% on an underlying basis. Three quarters of companies grew their dividends or held them steady, but their increases were too small to offset the big cuts from mining groups. Double-digit growth from the banks and a one quarter increase from Woodside Energy made the most positive contributions during the year. With no mining companies represented in the fourth quarter, underlying growth of 6.9% was driven by the banks whose margins are expanding along with their peers around the world.

The outlook for dividends

Pessimism over the global economy proved ill-founded in 2023, although there was considerable divergence from one part of the world to another. Corporate cash flow in most sectors remained strong and this provided plenty of firepower for dividends and share buybacks. This resulted in 5.0% underlying global dividend growth for the full year in line with the long-term trend.

The outlook for 2024 is uncertain. The lagged effect of higher interest rates will continue to have an impact, with slower global economic growth anticipated and higher funding costs for companies. We are nevertheless optimistic for dividends in the year ahead. The run-rate of US dividend growth in the fourth quarter bodes well for the full year, Japanese companies have embarked on a process of returning more capital to shareholders, Asia looks likely to pick up, and dividends in Europe are well supported. From a sector perspective, even though the rapid growth we have seen from banks around the world is going to slow this year, the rapid declines from the mining sector are also likely to make less of an impact. Energy prices remain firm so oil dividends look well supported and the big defensive sectors like healthcare, food and basic consumer goods should continue to make steady progress. What’s more, dividends are much less variable than profits over time.

We therefore expect 2024 to deliver similar underlying growth to 2023. One-off special dividends are by their very nature unpredictable, but they are unlikely to sustain the record levels we have seen over the last three years, so we assume these will fall to levels more in line with the pre-pandemic average of around $45 billion. Meanwhile, if the US dollar sustains its current lower levels against major global currencies, then we will see a small exchange-rate boost at the headline level. We therefore forecast total dividends of $1.72 trillion for 2024, up 3.9% on a headline basis. This equates to underlying growth of 5.0%.

 

Ben Lofthouse is Head of Global Equity Income at Janus Henderson Investors. Unless otherwise stated all data is sourced by Janus Henderson Investors as of 31 December 2023. Nothing in this document should be construed as advice. Past performance does not predict future returns. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.

 

1.We previously published a forecast for 5.3% for underlying growth, but after some data revisions related to the classification of special dividends in 2022, this became equivalent to 5.0%, in line with the actual outturn.

 

RELATED ARTICLES

Finding single-digit PE stocks in an overvalued market

The power of dividends

The best strategy to build income for life

banner

Most viewed in recent weeks

Meg on SMSFs: Clearing up confusion on the $3 million super tax

There seems to be more confusion than clarity about the mechanics of how the new $3 million super tax is supposed to work. Here is an attempt to answer some of the questions from my previous work on the issue. 

Welcome to Firstlinks Edition 566 with weekend update

Here are 10 rules for staying happy and sharp as we age, including socialise a lot, never retire, learn a demanding skill, practice gratitude, play video games (specific ones), and be sure to reminisce.

  • 27 June 2024

Australian housing is twice as expensive as the US

A new report suggests Australian housing is twice as expensive as that of the US and UK on a price-to-income basis. It also reveals that it’s cheaper to live in New York than most of our capital cities.

The catalyst for a LICs rebound

The discounts on listed investment vehicles are at historically wide levels. There are lots of reasons given, including size and liquidity, yet there's a better explanation for the discounts, and why a rebound may be near.

How not to run out of money in retirement

The life expectancy tables used throughout the financial advice and retirement industry have issues and you need to prepare for the possibility of living a lot longer than you might have thought. Plan accordingly.

The iron law of building wealth

The best way to lose money in markets is to chase the latest stock fad. Conversely, the best way to build wealth is by pursuing a timeless investment strategy that won’t be swayed by short-term market gyrations.

Latest Updates

Investment strategies

Have value investors been hindered by this quirk of accounting?

Investments in intangible assets are as crucial to many companies as investments in capital equipment. The different accounting treatment of these investments, however, weighs on reported earnings and could render ratios like P/E less useful for investors.

Investment strategies

Investors are threading the eye of the needle

As investors cram into ever narrower areas of the market with increasingly high valuations, Martin Conlon from Schroders says that sensible investing has rarely been such an uncrowded trade.

Economy

New research shows diverging economic impacts of climate change

There is universal consensus that the Earth is experiencing climate change. Yet there is far more debate about how this will impact different economies across the globe. New research sheds more light on the winners and losers.

SMSF strategies

How super members can avoid missing out on tax deductions

Claiming a tax deduction for personal super contributions can end in disappointment if it isn't done correctly. Julie Steed looks at common pitfalls and what is required for a successful claim.

Investment strategies

AI is not an over-hyped fad – but a killer app might be years away

The AI investment trend looks set to continue for years but there is only room for a handful of long-term winners. Dr Kevin Hebner also warns regulators against strangling innovation in the sector before society reaps the benefits.

Retirement

Why certainty is so important in retirement

Retirement is a time of great excitement but it is also one of uncertainty. This is hardly surprising given the daunting move from receiving a steady outcome to relying on savings and investments.

Economy

This vital yet "forgotten" indicator of inflation holds good news

Financial commentators seem to have forgotten the leading cause of inflation: growth in the supply of money. Warren Bird explains the link and explores where it suggests inflation is headed.

Sponsors

Alliances

© 2024 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.