A bonanza in very large special dividends helped drive global dividends to a record level in the first quarter.
Dividend payouts rose 12% globally to a first-quarter record of $326.7 billion, according to the latest version of the Janus Henderson Global Dividend Index. The boost was thanks to the largest contribution from special dividends—payments companies make to shareholders that occur outside the normal payout cycle—in nine years. Large banks, oil companies, and car manufacturers helped drive global growth.
The asset manager’s quarterly index tracks dividends paid by the 1,200 largest publicly traded companies around the world. The headline figure includes special dividends, exchange rate effects, and other factors. After stripping out those elements, underlying global growth was a much slower 3%.
One-off special dividends were $28.8 billion globally, the second-highest on record after the first quarter of 2014 when
Vodafone
sold Verizon Wireless in the U.S. and handed out the proceeds to its shareholders.
Payouts from car manufacturers
Ford Motor
(ticker: F) and
Volkswagen
(VOW. Germany) accounted for nearly a third of global special dividends in the quarter, Janus Henderson said. Headline payouts from the sector were 10 times larger year-over-year in the first quarter.
One-off special dividends also had a big effect in the transport, oil, and software sectors, said Janus Henderson.
While payouts from the mining sector fell sharply because of lower commodity prices, the slump was offset by large banks and oil companies. Globally, 95% of companies raised dividends or held them steady in the first quarter, the firm said.
Ben Lofthouse, head of global equity income at Janus Henderson, said in a statement that the first quarter’s strong dividend growth was “all the more impressive considering that 2022 was a difficult year for the global economy with high inflation, rising interest rates, conflict and continuing Covid lock downs.”
The firm expects dividend growth in 2023 to be “markedly slower” than over the past two years as the world economy decelerates and profits slow. Inflation, higher interest rates and tighter financial conditions will crimp demand. “Profits are under pressure as a result and this will impact dividend growth in due course,” said Lofthouse in the report.
There is a bright spot, however: dividend growth should be strong in Europe in the second quarter, prompting Janus Henderson to upgrade its forecast for 2023.
“We now expect dividend growth of 5.2%, delivering record payouts of $1.64 trillion,” wrote Lofhouse. Underlying growth is forecast to be 5%, up from 3.4% three months ago.
In the U.S. meanwhile, dividends climbed 8.3% on a headline basis to a quarterly record of $153.4 billion, boosted by “exceptionally large one-off special dividends,” the report stated. But underlying growth slowed to a more modest 4.8%, down from 5.5% the previous quarter, the slowest pace since the postpandemic recovery began, according to the report.
More than one third of the $9.8 billion in special dividends came from the oil sector, mainly second-tier producers, although the largest payout was distributed by Ford, said Janus Henderson. “Ford has not increased its regular dividend for several years, barring the immediate post-Covid restoration, but in common with many motor manufacturers, has enjoyed very strong free cash flow of late which it used to fund its one-off payment,” noted the report.
The U.S. real estate sector was the largest contributor to dividend growth in the first quarter, apparently shrugging off the impact of higher interest rates. Technology and healthcare also helped drive growth. Janus Henderson said 97% of U.S. companies in its index had raised their dividends or held them steady.
Elsewhere, Canada outperformed the U.S. First-quarter dividends grew 8.1% on an underlying basis, with oil and banking stocks as the biggest contributors.
Write to Lauren Foster at lauren.foster@barrons.com
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