Dividends paid out by the world’s largest listed companies hit record highs in the first quarter of this year despite warnings from prominent investors and asset managers of an impending slowdown in the global economy.
The world’s 1,200 largest public companies paid out a combined $326.7 billion in dividends in the first quarter of 2023, up 12% from a year earlier, according to a quarterly report from fund manager Janus Henderson.
Payouts to shareholders were boosted by the special dividend, the biggest contribution in nine years, thanks to one-off contributions from the likes of automakers Ford and Volkswagen.
Those gains reflected the persistence of corporate earnings even as global stock markets tumbled on Russia’s invasion of Ukraine, high energy prices and rising interest rates.
Fund managers have also raised concerns about the record $1.3 trillion in share buybacks companies conducted last year, which some see as an alternative to dividends, citing concerns that buybacks don’t benefit shareholders as much as they do company management.
Ben Lofthouse, head of global equity income at Janus Henderson, said growth was “impressive, considering the challenges facing the global economy in 2022”.
Janus Henderson said global dividends rose 3% in the first quarter, excluding special payments and currency movements, and expects total dividends to rise 5% to $1.64 trillion by 2023. The banking and oil industries are likely to be among the largest payers, Lofthouse said.
Mark Donovan, senior portfolio manager at Boston Partners who focuses on large-cap U.S. stocks, said the increase in the company’s payout reflects “increasing acceptance” that management must weigh the benefits of investing profits back into the company versus returning earnings to shareholders.
“Energy is a good example where over the years many executives have tended to reinvest capital in projects, many of which had poor returns and ultimately underperformed the stock price,” he said.
“These executives have found that higher dividends and increased buybacks are a better way to increase shareholder wealth and ultimately keep jobs.”
Janus Henderson said U.K. first-quarter dividends rose 6% to $15.3 billion, boosted by payouts from oil companies, airlines and contract caterer Compass, which boosted dividends to near-large amid strong demand. pre-epidemic levels.
Nearly half of corporate dividends in the first quarter of 2023 will come from the U.S., with real estate, technology and healthcare also driving growth, Janus Henderson said. Dividends from mining companies fell as commodity prices fell.
Earlier this month, Goldman Sachs forecast a five-fold increase in dividends this year, adding that even in a recession, dividend payments would only fall slightly because they are “stickiest” along with R&D spending.
Daniel Perris, fund manager at Federated Hermes and author of “The Strategic Dividend Investor,” predicts that dividends will grow in popularity, including in tech, as companies reduce share buybacks and race to attract investors in a tougher environment. in the company.
“The challenge for investors will be to identify which companies are in a position to do so – well-positioned in the new cash-based capital markets paradigm – and which are not,” he added.
Additional reporting by Chris Flood