Janus Henderson has released its Global Dividend Index, which shows Australia has set a new dividend record, as banks and miners drove a significant rebound from a challenging 2020.
The Janus Henderson Global Dividend Index (JHGDI) is a long-term study into global dividend trends. It measures the progress global firms are making in paying their investors an income on their capital, using 2009 as a base year – index value 100.
The index is calculated in US dollars and can be broken down into regions, industries and sectors. It enables readers to easily compare the dividend performance of countries like the US, which provides a large proportion of global dividends, with smaller nations, such as the Netherlands.
2021 saw global dividends recover very strongly, more than making up for the cuts made during the worst of the pandemic in 2020, according to the latest Janus Henderson Global Dividend Index. Global dividends surged 14.7% on an underlying basis, reaching a new record of A$2.02 trillion (US$1.47 trillion).
Growth was fastest in nations that suffered the biggest declines in 2020, helping Australia to set a new dividend payout record of A$87.1 billion (US$63.3 billion) in 2021. Globally, headline growth was 16.8%, boosted by record one-off special dividends.
Aussie banks, miners lead the way
A quarter of the global increase was delivered by companies restarting payouts paused during 2020. Most of this can be attributed to banks, whose dividends jumped by 40%, or A$69.5 billion (US$50.5 billion), with payments returning to nine-tenths of their pre-pandemic high in 2021. Dividends were driven by restoring payouts to more normal levels, after restrictions in dividend distributions were curtailed in 2020.
The effect was particularly pronounced in Australia, as banks finally returned dividends to investors after APRA relaxed dividend restrictions in 2021, accounting for a third of the nation’s headline increase in payouts last year.
Australian miners continued their strong momentum, distributing record amounts of cash in a mixture of regular and special dividends, reflecting the soaring price of commodities. The ASX-listed BHP Group lead from the front, paying the world’s largest ever mining dividend at A$17.2 billion (US$12.5 billion), while rival Fortescue Metals followed closely, distributing A$15.9 billion (US$11.6 billion) to shareholders.
Banks, miners buoy global rebound
More than one quarter of the A$291 billion (US$212 billion) annual dividend increase came from miners, which benefited from soaring commodity prices. Record payments from the miners reflected the strength of their profits.
The mining sector distributed A$132.9 billion (US$96.6 billion) over the year, almost double the previous record set in 2019 and 10 times more than during the slump in 2015-16. However, as a highly cyclical sector their distributions will return to more normal levels when the commodity cycle turns.
The global economic recovery enabled payouts from consumer discretionary and industrial companies to grow by 12.8% and 10.0% respectively on an underlying basis, while healthcare and pharmaceutical groups grew their dividends by 8.5%. Technology companies, whose profit growth continued relatively uninterrupted by the pandemic, added A$23.4 billion (US$17 billion), an increase of 8.0%.
A quarter of the dividend increase was delivered by just nine companies, eight of which are banks or miners.
One third of global dividend rebound came from the UK and Australia.
From a geographical perspective, the most rapid dividend growth came from regions where 2020 had seen the steepest cuts, such as Europe, the UK and Australia. Payouts reached new records in a number of countries including the US, Australia, China and Sweden, but one-third of the rebound came from just two countries, Australia and the UK, where a combination of surging mining payouts and restored banking distributions made the biggest contribution to growth.
Upgraded forecast
The exceptional strength of Q4 payout figures, along with improved prospects for 2022, have led Janus Henderson to upgrade its forecast for the full year. For 2022, Janus Henderson expects global dividends to reach a new record of A$2.09 trillion (US$1.52 trillion), up 3.1% on a headline basis, or 5.7% in underlying terms.
Jane Shoemake, client portfolio manager, Global Equity Income said: “A large part of the 2021 dividend recovery came from a narrow range of companies and sectors in a few parts of the world. But beneath these big numbers, there was broad-based growth both geographically and by sector.
"In the context of the dramatic rebound seen in the banking sector, and the exceptional cyclical surge from mining companies, it would be easy to overlook the encouraging growth seen from those sectors that have delivered consistent increases in recent years, like the technology sector.
"The same applies to geographical trends. The US, for example, is often ahead of its peers but saw slower dividend growth than the rest of the world in 2021. This was because it proved to be resilient in 2020 so there was limited scope for a large rebound.
"We expect many of the longer-term dividend growth trends witnessed since the index was launched in 2009 to reassert themselves in 2022 and beyond. The big unknown for 2022 is what happens in the mining sector, but it is reasonable to assume that dividends here will be lower than the record levels achieved in 2021 given the significant correction in iron ore.”
- Supplied by Janus Henderson