Dividends have returned to entice investors
I dividends they’re coming back to entice investors and now there are opportunities that could be really interesting. Truth and Business talked to Jane Shoemake, Client Portfolio Manager di Global Equity Income di Janus Henderson.
How did dividends fare globally in 2022?
According to the last Janus Henderson Global Dividend Index 2022 saw strong growth in global dividends. The distributions increased by 8.4%, reaching the record figure of 1,560 billion dollars, in line with the forecasts of Janus Henderson. After adjusting for dollar appreciation against most currencies, declines in special dividends and other technical factors, underlying growth was even more robust, equal to 13.9%.
In which sectors do we find the best coupons?
About half of global dividend growth in 2022 is due to producers of oil and gas and financial companies. To have a clear picture of the evolution of dividends in 2022 it is good to take sector trends into account. As energy prices soared, oil and gas producers increased payouts to shareholders by two-thirds through a mix of ordinary distributions and one-time extraordinary dividends. Nearly a quarter of global dividend growth in 2022 is due to these companies. But there have been near-wide increases in distributions, and the growth has been particularly strong among emerging market companies.
How much has the financial sector affected?
Banks and financial firms, particularly in the US, UK and Europe, also contributed a quarter of annual growth as they continued the strong post-pandemic dividend recovery that began in 2021. At the same time, skyrocketing shipping costs supported transport companies around the world and following the surge in demand and increases in the prices of cars and luxury goods, companies active in these sectors have emerged as the most important driver of dividend growth in Europe. Conversely, the decline in raw material prices led to a decline in distributions in the extractive sector which had reached all-time highs in 2021. At the sector level, some clear winners emerge, however growth has been across the board – globally, 88% of companies increased or confirmed dividends.
From a geographical point of view, which areas to look at?
Dividend growth was so strong that record dollar payouts were made in twelve countries. We refer, among others, to United States, Canada, Brazil, China, India and Taiwan; in any case, in many other nations such as France, Germany, Japan and Australia dividends hit record levels in local currency.
And in Italy?
The underlying dividends in Italy they rose by 3.3% scoring a new record with 15.5 billion euros, and narrowly exceeded the 2021 high. In the financial sector, the 2021 total included the recovery of previously missed payments, which is why the 2022 result looks lower in comparison. Worth mentioning is Atlantia which has resumed the distribution of dividends.
What are the forecasts for 2023?
In the new year, the prospects for dividends appear more uncertain. Troubles such as inflation, the size of future rate hikes and geopolitical risks loom ahead. Companies’ cash flows will come under pressure as declining demand and higher debt servicing costs limit room for dividend growth. In light of these uncertainties, Janus Henderson estimates slower growth in 2023 in payments for 1.6 trillion dollarsup 2.3% on an overall basis and 3.4% on an underlying basis.
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