Dividends paid out by major companies increased in the past quarter and is expected to continue growing this year, even with global growth slowing.
Growth has been driven by record payouts by banks and in Europe especially, which outstripped all other regions.
Roughly 88% of the world's largest companies either increased or held their shareholder payouts steady in the second quarter, according to data analysed by Janus Henderson from the 1,200 biggest public companies by market value.
A total of US$568.1 billion was paid out in dividends in the period, up 4.9% on the second quarter of the previous year, or up 6.3% if special dividends were ignored in both periods, as these enjoyed an outsized quarter in 2022.
Payouts are likely to grow 5% to a record US$1.64 trillion in 2023, the fund manager forecast.
Banks contributed more than half of global dividend growth in the past quarter, with UK names including Lloyds Banking Group PLC (LSE:LLOY) and Barclays PLC (LSE:BARC) hiking 15% and 20% to enable a record US$85.3 billion paid out by the sector in the quarter, up 19.7% on a year ago.
Topped only by food behemoth Nestle, HSBC Holdings PLC was the world's second-biggest dividend payer, with the banking sector as a whole enjoying the benefits of more than a year and a half of central bank interest rises in most major economies, with banks in the UK accused of boosting profit margins by raising mortgage rates much faster than those on savings.
Car and truck makers accounted for a seventh of growth, up over 20%, while mining payouts fell by a third and oil dividends were lower due to cuts in Brazil and Colombia.
World's biggest dividend payers
- Nestle SA
- HSBC
- Mercedes-Benz
- China Mobile
- BMW
- BNP Paribas
- Microsoft Corporation (NASDAQ:MSFT)
- Allianz
- Sanofi
- AXA
Following Nestle and HSBC as the biggest dividend payers in the quarter, were a list of carmakers, European financial giants, China Mobile and drugmaker Sanofi.
In the second tier were the likes of Toyota Motor Corporation, Rio Tinto (12th), LVMH (15th), Apple Inc (NASDAQ:AAPL) (17th) and Exxon (19th).
Regionally, Europe excluding the UK had the fastest dividend growth, expanding 9.7% to US$184.5 billion, led by some of the banks and vehicle manufacturers mentioned above.
Even though economic growth is moderating, with global profits forecast to be flat this year compared to last year's record highs, companies around the world "are now more cautious about the outlook", said Ben Lofthouse, head of global equity income at Janus Henderson.
But he noted that dividend income is typically much less volatile than earnings.
"Payouts lagged behind profit growth last year and so can therefore exceed it this year," he said.
Lofthouse predicted that the growth of the banking sector's dividends will continue.
"A weaker economic environment is typically negative for banks, but the positive effect on bank margins from the end of years of ultra-low interest rates is very powerful and is driving dividend payouts. The big banks are very tightly regulated and so enter the downturn in a strong capital position," he said.