Payouts from companies hit a record $1.5trn (£1.1trn), up 16.8% last year thanks to a surge in dividends from banks and miners, according to the latest Janus Henderson Global Dividend report.
After the upheaval of the pandemic, during which many income stocks were forced to cut, suspend or cancel their dividends in an effort to preserve cash, 2021 was a renaissance.
There were record payouts in the US, China and Sweden but the fastest-growing rates were in dividend stalwarts Europe, Australia and the UK, which were adversely hit by the pandemic but rebounded strongly last year.
Source: Janus Henderson
Indeed, UK dividends rose 44.3% on a headline level, an increase of $28.9bn, driven by a record amount of special dividends from the mining sector and higher payouts from banks.
Australia was the fastest-growing dividend region for a similar reason, the report found. It helped the Asia Pacific ex Japan area to register a payout increase of 20%, reaching a new high of $163bn.
“Australian payouts slumped during the pandemic’s first year in 2020, joining France and the UK at the bottom of the world rankings, as its important banking sector faced regulatory constraints on distributing cash to shareholders,” the report said.
“This resulted in a strong rebound, as those payments were reinstated in 2021 – banks accounted for a third of the headline increase while most of the remainder came from Australia’s mining groups, which distributed record amounts of cash in a mix of regular and special dividends as a result of booming profits driven by soaring commodity prices.”
These two sectors were instrumental in the global payout recovery. The mining sector accounted for a quarter of the $212bn annual increase last year, with BHP becoming the largest payer in the world. Similarly, banking dividends were up 40% in 2021 and the sector was also responsible for a quarter of the global increase.
Source: Janus Henderson
Elsewhere in Asia, Japanese dividends were up 11.4%, while the emerging markets – which span the globe but have a large portion of assets in Asia – were up 32%.
In Europe, dividends were up a quarter on the previous year, again boosted by the banks, although utilities, consumer discretionary and insurance firms also played a key role here.
There was more modest growth in the US, where payouts rose 5.9%, as companies had generally avoided the worst of the cuts in 2020, so did not have the favourable comparables from the previous year.
The report said some investors may fear that the market is becoming more concentrated. Indeed, nine companies (eight of which came from the two sectors above) were responsible for a quarter of the total dividend increase.
“This indicates that a large part of the recovery came from a narrow range of companies,” the report said. However, there were encouraging signs of a broader improvement in the market as 90% of dividend-paying firms increased or held their payouts last year.
Things could get even better for investors this year, the report said, with global dividends expected to rise a further 5.7% in 2022 to $1.5trn.
Source: Janus Henderson
However, the big unknown is the mining sector. “Iron ore prices are a significant driver and, despite recovering some lost ground recently, are lower at present than during most of 2021,” the report noted.
This could be offset by an increase in dividends from oil majors, which are expected to improve this year on the back of higher energy prices, it added.