Wednesday 16th November – The energy crisis drove a large rise in dividends in the third quarter as oil companies distributed record profits to shareholders, according to the latest Janus Henderson Global Dividend Index. The global total paid rose by 7.0% on a headline basis to $415.9bn, easily a record for the third quarter. The underlying increase was 10.3% once the strength of the dollar and other factors were taken into account. Globally, 90% of companies raised dividends or held them steady, slightly below the 94% recorded in the first half of the year.
Surging oil dividends offset a slump in mining payouts
Global sector trends are dominant at present. This meant oil & gas producers were the overwhelming drivers of growth in Q3, increasing their headline dividends by three quarters year-on-year1 to a record $46.4bn. Oil companies all over the world hiked their payouts, largely via special dividends rather than an increase in their regular payments. Oil dividends were particularly strong in emerging markets, Asia and North America with the biggest increase coming from Petrobras in Brazil. Indeed, without the positive impact from this sector, the global total would have been roughly flat in the third quarter. The surge in oil exactly matched the slump in mining, where companies are now cutting dividends from their recent record highs in response to lower commodity prices, impacting Australia in particular. There was growth from almost every other sector, most notably transport (including shipping), banks, semiconductors, and chemicals.
Taiwan and the US made the largest contribution to growth but China disappointed and Australia saw declines
From a geographical perspective, Taiwan, the US, Hong Kong and Canada were the most important contributors to growth. A mix of energy and financials were key for the last three, but in Taiwan there was exceptional strength across a range of industries. Seasonally Q3 is very important for Chinese dividends. Here, underlying payout growth lagged the wider world (+6.7%) and one third of companies in our index cut dividends – Chinese real estate, hit by a severe downturn, was a notable point of weakness.
The encouraging third quarter has prompted a $30bn upgrade in Janus Henderson’s full-year headline figures, driven mainly by higher one-off special dividends, strength in the oil sector and in Asia. Janus Henderson now expects headline dividends of $1.56 trillion2 , up 8.3% year-on-year. Underlying growth is set to be 8.9%, an increase of 0.4 percentage points compared to Janus Henderson’s expectations three months ago and still firmly ahead of the 5-6% longer-term dividend growth trend.
Jane Shoemake, Client Portfolio Manager for global equity income said: “The surge in oil dividends has coincided with reductions from the miners, though payouts from the sector are nevertheless very high by comparison to history. 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 payouts 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 payouts. 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.”
1 Headline increase – Janus Henderson judges that headline growth rates, which include one-off special dividends, are more representative for the oil sector.
2 Janus Henderson has removed all Russian companies from the index and restated all historic data. Russian companies have only contributed 1.5% to global payouts over the last decade consequently the long-term impact is small.
Janus Henderson Investors
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Our headline growth rate describes the change in the total dollar amount paid by companies compared to the corresponding quarter each year. Our underlying figure adjusts for the distortion that can be caused by one-off special dividends, changing exchange rates, the effect of companies entering and leaving the global top 1,200 that comprise our index and the impact of changes in payment dates. The latter two tend to be negligible over the course of a whole year at the global level, though they can have a greater impact in any one quarter, geography or sector.
Janus Henderson Group is a leading global active asset manager dedicated to helping investors achieve long-term financial goals through a broad range of investment solutions, including equities, fixed income, multi-asset, and alternative asset class strategies.
At 30 September 2022, Janus Henderson had approximately US$275 billion in assets under management, more than 2,000 employees, and offices in 23 cities worldwide. Headquartered in London, the company is listed on the NYSE and the ASX.