Global dividends slowing. After the record recorded in the second quarter, when 568 billion coupons were paid, global distributions fell slightly in the third quarter, falling by 0,9% in overall terms at 421,9 billion dollars. There underlying growth, adjusted for one-time special dividends, exchange rates and other technical factors, was 0,3%. This is what emerges from the latest Global Dividend Index of Janus Henderson according to which the decline was mainly caused by the cuts established by a small group of companies belonging to the mining and oil sectors in Brazil and Taiwan. Without these cuts, in fact, the underlying increase in coupons stands at 5,3%.
From a geographical point of view, Janus Henderson highlights above all the Chinese record, but also the good result of Europe driven by an Italy that is about to close an unprecedented year.
Global dividends: mining down, banks and autos booming
From a sectoral point of view, it was mainly the companies that cut dividends mining sector, half of which reduced distributions in the third quarter of 2023. Followed by oil producers in Brazil and Taiwan which, in contrast with the rest of the sector, have decided to cut coupons. Two examples? Petrobras in Brazil and Bhp in Australia. Also noteworthy is the strong reduction recorded in dividends chemical sector and Asian real estate sector, a decrease that reflects the difficult conditions of these markets in the reference region.
However, as a counterbalance comes the banking sector, whose dividends in the June-September period recorded underlying growth of 9,3%. The coupons of the companies also went up public utility services e of the automotive sector. Globally, nine out of ten companies increased distributions or kept them unchanged, although the differences were notable across sectors and countries, highlights Janus Henderson.
Record dividends in China, Europe positive
From a geographical point of view, in the United States distributions saw growth of 4,5%, a slower pace than previous years. However, 98% of US companies increased or kept their dividends unchanged.
Banking and oil companies push the Canada, but the absolute protagonist of the quarter is China. This period, in fact, “marks the seasonal peak for the China and for most Asia-Pacific countries, excluding Japan,” underlines the report, which states that Chinese dividends have reached new records thanks to the strong growth of Petrochina, which masked weakness in China's banking and real estate sectors. The one-sixth drop in distributions of Taiwan reflected the difficulties of the oil, chemical, steel and insurance sectors, while a similar decline in Australia was caused by the sharp decline in distributions in the mining sector. Growth a Hong Kong was hampered by the real estate sector, where all companies reduced or kept their dividends unchanged.
And there'Europe? According to Janus Henderson, the old continent continued to show very strong growth, continuing the trend already seen in the traditionally very important second quarter. In difficulty, however, the UK, where reduced distributions in the mining sector largely canceled out increases in the banking, oil producers and utilities sectors.
Dividends: Italy growing with Enel and Eni
As for Italy, only two companies in the Janus Henderson index paid dividends in the third quarter, viz Eni and Enel. Together these two companies have recorded a cunderlying growth of 4,2%. “Dividend per share increases were higher, but Eni's share buyback program meant that the total distributed did not keep pace with the increase in dividend per share announced by the company,” he points out Federico Pons, country head for Italy by Janus Henderson Investors. For the expert, our country's prospects for the fourth quarter are positive and “could mean a record dividend this year”. In Italy, in fact, the coupon amount could exceed 18 billion euros.
Jh analysts have calculated that so far the Italian companies included in the Global Dividend Index have paid to their shareholders 14,5 billion euros in dividends, including the 170 million attributed to changes in the index itself. A figure that represents an underlying increase of 11,5% compared to the 12,9 billion distributed from January to September 2022.
Global dividends: downward estimates for 2023
Globally,Janus Henderson has revised the forecasts slightly downwards for the whole of 2023, going from 1.640 to 1.630 billion dollars, with an increase of 4,4% year on year. However, the study highlights that underlying growth, unaffected by exchange rates and one-off distributions, turned out to be better than expected. Additionally, several countries, including the United States, France, Canada, Switzerland and China, are on track to make record distributions. Because of this, underlying growth forecasts have been raised 5,0% to 5,3%.
“The apparent weakness of the third quarter does not cause concerni, considering the strong impact had by a small group of companies,” explains Ben Lofthouse, head of global equity income at Janus Henderson, according to whom “the level and quality of growth appears better this year than it seemed a few months ago, with distributions now less dependent on one-off dividends and volatile exchange rates.”
“Dividend growth by companies generally remains solid across numerous sectors and regionsi, with the exception of commodity-related sectors, such as mining and chemicals,” Lofthouse continues, noting that “It is normal and recognized by investors, however, that commodity sector dividends will rise and fall throughout the cycle and that this trend it is not indicative of larger problems. Furthermore, our data shows that a diversified global portfolio has natural stabilizers, with growing sectors – such as banking and oil – being able to offset those whose dividends are declining, for example the mining and chemicals sectors. And of course, dividends are typically much less volatile than earnings over time, and therefore provide support during times of economic uncertainty.”
