Global dividends are on pace for a record year after an historic third quarter, according to Janus Henderson, as the firm’s Global Dividend Index revealed $403.5bn (£300bn) was paid out between July and September – 22% more than in 2020.
This was not solely due to flattering comparisons either, the report noted, as in the third quarter of 2020 companies restored distributions they had suspended earlier in the year as lockdowns descended.
Around 90% of companies either raised or held their dividends in the third quarter, while full-year payouts are expected to increase 15.6% year-on-year to $1.5trn – a global record.
If this is the case, global dividends will have recovered from their March 2021 mid-pandemic lows in just nine months.
Miners were one of the areas to benefit, as high commodity prices resulted in record profits for many of the major mining stocks, which in turn was passed onto shareholders.
Around three-quarters of the miners in the report at least doubled their payouts. Overall, $54.1bn was paid out by the miners, 15% of the total dividends in the quarter.
“In 2021, mining companies will pay almost double the 2019 record and more than 10 times the low point in 2016,” the report said.
However, mining dividends can be volatile and with commodity prices elevated, payouts next year could be lower if prices come down, something that has started to happen in areas such as iron ore.
Source: Janus Henderson Global Dividend Index
The lifting of constraints on banking dividends and lower-than-expected loan impairments – which led to higher profits – pushed overall payouts from financials up by a third.
Collectively they accounted for a 25% of the third-quarter total, while three-quarters of oil majors raised or held their dividends – although some severe reductions meant the sector only rose 4.1% in the third quarter.
Jane Shoemake, client portfolio manager on the global equity income team at Janus Henderson, said: “Three important things changed during the third quarter. Mining companies all around the world have benefited from sky-high commodity prices and have delivered record results with dividends following suit.
“Secondly, banks took advantage of the relaxation of limits on dividends and restored payouts to a higher level than seemed possible even a few months ago. Finally, the first few companies in the US to start the annual dividend reset showed that businesses there are keen to return cash to shareholders.”
Looking ahead to 2022, Shoemake said the biggest driver to dividends will be the ongoing restoration of banking payouts, as it is “unlikely” that mining companies can sustain their current levels.
On a regional basis, American companies were the highest-paying in the third quarter as they continued to remain resilient. Last year payouts from the region remained strong as there was less regulation on areas such as the banks, while companies were more likely to stop share buybacks than dividends to conserve cash.
As such, it remained the highest-paying region globally, despite its lower-than-average 10.2% growth rate, the report said, with total dividends of $130.7bn.
Some 97% of US companies raised their dividends year-on-year or held them steady, with financials, pharmaceuticals and healthcare equipment & services accounting for one third of the increase.
Morgan Stanley alone paid out an additional $750m, doubling its dividend per share and announcing a $12bn share buyback programme, having comfortably passed the Federal Reserve’s annual bank stress test.
Just behind America was Asia ex Pacific, although there were big disparities between countries in the region. Overall, eight companies in 10 increased dividends or held them steady and the regional total jumped by more than a quarter on an underlying basis.
Source: Janus Henderson Global Dividend Index
Australia was the standout, as dividends from the country almost doubled in the third quarter, propelled by its large mining groups such as BHP, which is on pace to be the world’s largest payer this year, distributing $18.9bn to shareholders – the second largest annual dividend on record.
The UK also benefited from this, as the firm is still currently dual-listed across both countries. Along with a resurgent banking sector and sole individual cases, such as advertising group WPP, UK dividends were 88.6% higher year-on-year the report said.
Europe was the only dark spot, with underlying growth of 28.8%, but a one-third decline on a headline basis. Around one-tenth of full-year European dividends will have been paid between July and September, however, suggesting the decline is “not concerning”.