Global dividends jump 11% in the first three months of 2022

Global dividend payments have had a strong start to 2022.

According to the latest Janus Henderson Global Dividend Index*, global dividends jumped 11% in the first three months of the year, partly due to the ongoing normalisation of payouts following the disruption caused by the pandemic.

“Q1 2021 saw significant dividend cuts, so it provides a relatively low base for comparison,” the report stated. “However, the growth also reflects the robust post- Covid economic rebound that took place in much of the world in 2021 and into early 2022.”

Every region of the world enjoyed double-digit growth*, with the US, Canada and Denmark setting all-time quarterly records. However, there was notable weakness in parts of Asia, such as Hong Kong, where lockdowns continue to plague the economy.

Every sector, meanwhile, posted year-on-year increases*. “The biggest single dividend increase came from Danish shipping group Moller-Maersk which is benefitting from the disruption in global supply chains,” the report continued.

Dividends by region

Oils and miners help UK dividends grow

Dividend payouts in the UK grew 14.2% on an underlying basis in the first quarter, though the headline total fell, due to Tesco paying a large special dividend in Q1 2021*. “Oil companies were the main driver of the increase, but mining groups will begin to contribute very strongly from the second quarter,” said Janus Henderson. “Healthcare payouts also rose, after AstraZeneca’s first dividend hike in nearly ten years, while the restoration of telecom operator BT’s distribution after a two-year pause also made a significant contribution to growth.”

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Denmark pulls European dividends higher

Dividends from Europe overall rose 22.2% on an underlying basis, but without the payout from Moller-Maersk, they would have been just 3.9% higher*. The figure was held back by minimal dividend increases from the usually dominant Swiss pharmaceutical giants Novartis and Roche.

In Scandinavia, Norwegian oil group Equinor almost doubled its payout on surging oil prices, while large increases from Swedish banks drove rapid growth in Sweden. Finnish payouts, meanwhile, were flat.

In Germany, Siemens and Infineon Technologies restored their payouts to full strength after their pandemic-related cuts, driving the German total up 16.8% on an underlying basis in an otherwise quiet quarter*.

The post-pandemic recovery was evident in France, too, where luxury groups Kering and Hermes restored their dividends to full strength and will both pay record dividends in May.
TotalEnergies, however, was one of relatively few oil companies around the world not to raise its dividend, “but it had also not made a cut during the pandemic when many others around the world did,” pointed out the report.

In Spain, two or the large utility companies, Endesa and Naturgy, succumbed to cuts, while Iberdrola made only a small token increase.

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North American dividends post new record

Companies in the United States had a strong start to the year. Payouts rose 10.4% on an underlying basis to a new record of $141.6bn*. An 11% increase from Microsoft ensured it was the top payer in the US and among the top three contributors to growth*. Pharmaceuticals were the largest payers, accounting for more than a tenth of the US total, but their 8.4% growth rate was slightly behind the US average*.

Canadian dividends also reached a new record, up by 14% on an underlying basis*. Oil producers and banks were the most important drivers, “but the growth was broad-based here too, with 97% of Canadian companies in the index making increases,” said Janus Henderson.

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Australia boosts Asian dividends

Australian dividends leapt 38.9% on an underlying basis in the first quarter*. The headline increase was 13.2%*. “The difference mainly reflects the designation of BHP’s dividend payments which last year were split between a special and regular payment and this year were not,” the report stated.

“In our view, the headline change is more representative in this case since in both years BHP’s very large payments reflected strong profitability. With another distribution planned for later in the year, BHP is likely to be the world’s largest payer in 2022 for the second year running.”

Elsewhere in the region, dividends in Hong Kong suffered from the effects of strict Covid-19 lockdowns. “They fell by 12.4% on an underlying basis, with a one third cut from Hang Seng Bank inflicting most of the damage,” said the report. Taiwan Semiconductor was the only Taiwanese payer in our index in Q1 and it raised its dividend by 10%. Singapore’s only Q1 payer, Singapore Telecom, made yet another cut.”

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A quiet quarter for Japanese dividends

In a seasonally quiet quarter for Japan, 94% of companies either held dividends steady or increased them, with underlying growth of 13.2%*. Tyre company Bridgestone and healthcare group Chugai were among those making a large contribution to growth.

Baillie Gifford Japanese Income Growth is the only Elite Rated fund in this sector.

Russia drives up emerging markets dividends

Russian companies are part of the index but, given the international sanctions imposed on Russia following its invasion of Ukraine, they are uninvestable. “Russia is small in the global context, accounting for just 2% of global dividends paid in 2021, though it is large within emerging markets, making up one fifth of total payouts over the last five years,” the report said. “In total, Russian payouts were almost three times higher year on year, helping drive emerging market dividends up 36.4% on an underlying basis.”

Elsewhere, almost every Indian company in the index raised its payout, and Brazilian dividends rose 7.4% on an underlying basis*. Meanwhile, Qatari companies are emerging as significant dividend payers, according to Janus Henderson.

Magna Emerging Markets Dividend and JPM China Growth & Income are Elite Rated options in this space.

The outlook for global dividends

“We are not changing our expectations for the remaining quarters of the year, though incorporating the good Q1 numbers means our full-year forecast is a little higher than three months ago – up by 1.3%,” concluded the report.

“The easy base effect, which compared Q1 2022 to a first quarter last year that was depressed by the pandemic, will disappear as the year progresses. What’s more, the world economy is beset by several challenges at present – the war in Ukraine, rising geopolitical tensions, high energy and commodity prices, rapid inflation, and a rising interest rate environment. The resultant downward pressure on economic growth will impact company profits in a number of sectors.

“These challenges also mean much greater uncertainty is likely to affect corporate decision making. The impact on dividends is likely to show up beyond 2022, but it is important to remember that dividends are much less volatile than profits. The latter tend to move dramatically over the economic cycle, but dividends tend to be much steadier.

“Indeed, the fact that dividends have already surpassed pre-pandemic highs is part of a longer-term story that highlights how dividends have proved to be a reliable source of income growth over the long term. Moreover, this growth means that dividends provide some shelter against inflation which cash savings cannot do.”

Elite Rated Global Equity Income funds include TM Redwheel Global Equity Income and Murray International.

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*Source: Janus Henderson Global Dividend Index, edition 34, May 2022

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