Global Dividends Cross $606 Billion in Q2 of 2024

Global income investors enjoyed a very strong second quarter of 2024 as pay-outs rose 5.8% to an all-time record of $606.1 billion, according to the latest Janus Henderson Global Dividend Index.

Underlying growth was even stronger at 8.2% once the drag caused by exchange rates, especially the weak Japanese yen, was taken into account, Janus Henderson, the London-headquartered British-American global asset management group said.

The initiation of dividend payments by large US companies that included Meta and Alphabet boosted the global Q2 growth rate by 1.1 percentage points, but the picture was nevertheless one of broad-based growth – globally 92% of companies raised dividends or held them steady.

“Moreover, one third of sectors saw double-digit underlying growth and only three sectors saw dividends fall,” the global fund manager said.

Q2 marks Europe’s seasonal high point as the $204.6 billion total marked an all-time record for the region as pay-outs jumped 7.7% year-on-year. France, Italy, Switzerland and Spain all saw record dividends.

More than half the growth in European dividends came from banks which have benefitted from the higher interest rate environment. Germany stood out as pay-outs fell 1.2% year-on-year, with a large cut by Bayer having the largest negative impact.

In the US, dividends rose 8.6% – two fifths of this growth was due to Meta and Alphabet paying their first dividend, the index showed.

The second quarter has been seasonally important for Japan as pay-outs soared by one seventh on an underlying basis to a new yen record, but the weak exchange rate meant Q2 did not surpass previous dollar highs.

The largest contribution to growth came from Toyota Motor which is Japan’s largest dividend payer and made one of the largest increases, following record profits in its latest financial year.

Elsewhere in Asia-Pacific pay-outs were flat in Hong Kong and significantly lower in Australia owing to a cut from Woodside Energy. Singapore, Taiwan and South Korea all saw double-digit growth.

Banks Driving Higher Pay-Outs

Banks once again were the most important driver of higher pay-outs, accounting for one third of the underlying increase year-on-year. European banks were the main contributors, but the trend was evident globally. Insurers, vehicle manufacturers (especially in Japan) and telecoms were also important contributors to growth in Q2.

After a strong second quarter, and to allow for the strong contribution dividend newcomers could make this year, Janus Henderson has upgraded its forecast for 2024’s dividends.

Janus Henderson now expects companies around the world to distribute a record $1.74 trillion, up 6.4% compared to 2023 on an underlying basis (up from 5.0% at the time of its Q1 report) and equivalent to a headline increase of 4.7% (up from 3.9%).

Jane Shoemake, Client Portfolio Manager on the Global Equity Income team at Janus Henderson, said that they had optimistic expectations for the second quarter and the picture was even brighter than they predicted thanks to strength in Europe, the US, Canada and Japan.

Around the world, economies have generally borne the burden of higher interest rates well. Inflation has slowed while economic growth has been better-than-expected.  Companies have also proved resilient and in most industries continue to invest for future growth, Jane said.

This benign backdrop has been especially positive for the banking sector, which is enjoying strong margins and limited credit impairments, which has bolstered profits and generated a lot of cash for dividends.

According to Jane, the initiation of dividends from big US media-technology companies Meta and Alphabet, along with China’s Alibaba among others, is a really positive signal that will boost global dividend growth by 1.1 percentage points this year.

These companies are following a path well-trodden by growth industries over the last couple of centuries, reaching a point of maturity where dividends are a natural route for returning surplus cash to shareholders.

“In so doing, they have confounded sceptics who said this group of companies was different. The stock market simply evolves over time as industries rise and fall as they meet the changing needs of society. Paying dividends will also broaden their appeal to investors for whom dividends are a vital part of their investment strategy and it may also encourage more companies to follow suit,” Jane added.