Dividends from largest companies hit record $326bn in first quarter

Dividends issued in the first quarter by the world’s largest listed companies hit a record this year, even as prominent investors and asset managers warn of a coming global economic slowdown.

The world’s 1,200 biggest public companies collectively issued $326.7bn in dividends in the first quarter of 2023, a rise of 12 per cent on the same period a year ago, according to a quarterly report from fund manager Janus Henderson.

Payouts to shareholders were boosted by the largest contribution in nine years from special dividends, as companies such as carmakers Ford and Volkswagen made one-off contributions.

The rises reflect the durability of corporate earnings even as stock markets around the world tumbled on Russia’s invasion of Ukraine, high energy prices and rising interest rates.

Fund managers have also expressed concerns over the record $1.3tn of share buybacks that companies engaged in last year, seen by some as an alternative to dividends, citing concerns that they did not benefit shareholders as much as company management.

Ben Lofthouse, head of global equity income at Janus Henderson, said the growth was “impressive, considering the challenges the global economy faced in 2022”.

Stripping out special payments and moves in exchange rates, Janus Henderson said global dividends rose 3 per cent in the first quarter and predicted the total would rise 5 per cent to $1.64tn in 2023. Lofthouse said the banking and oil industries are likely to be among the biggest payers.

Mark Donovan, a senior portfolio manager focusing on large-cap US equities at Boston Partners, suggested that the rise in dividend payouts by companies reflected a “growing acceptance” that management have to weigh the benefits of investing profits back into the company alongside returning gains to shareholders.

“Energy is a great example where for years and years a lot of executives were biased towards putting money back into projects, many of which yielded low returns and ultimately resulted in poor stock price performance,” he said.

“Those executives have figured out that raising a dividend and increasing buybacks is a better way to enrich shareholders and ultimately keep their jobs.”

Janus Henderson said UK dividends grew 6 per cent to $15.3bn in the first quarter, driven by payouts from oil companies, airlines and the contract caterer Compass, which raised its dividend back close to pre-pandemic levels amid strong demand.

The US was responsible for close to half of corporate dividends issued in the first quarter of 2023, Janus Henderson said, with real estate, tech and healthcare also driving growth. Dividends from mining companies fell due to the drop in commodity prices. 

Earlier this month Goldman Sachs forecast dividends would rise by 5 per this year, adding that even in a recession scenario dividend payouts were only likely to fall slightly, as they are the “stickiest” alongside spending on research and development.

Daniel Peris, a fund manager at Federated Hermes and author of “The Strategic Dividend Investor”, predicted that dividends would increase in popularity, including among tech companies, as companies reduced share buybacks and competed to attract investors in a tougher climate.

“The challenge for investors will be to determine which companies can afford to do so — are well positioned for the new cash-based capital markets paradigm — and which are not,” he added.

Additional reporting by Chris Flood