After a “historic” 2021 due to the rebound of economic activity after the health crisis, 2022 is a new record for dividend payouts. Dividend growth over one year amounts to 8.4%. After adjusting for currency effects and lower extraordinary dividends, the underlying growth is 14%.
Not only does the episode of the health crisis seem to be over, but the effects of the war in Ukraine--which directly impacts the economy and the purchasing power of households--directly benefit shareholders.
Indeed, half of the 8.4% increase in dividends is due to financial companies--which have benefitted from the rise in central bank rates that are fighting inflation due to the war. This rise directly impacts their interest margins--and oil and gas companies.
As a result of the surge in energy prices that has inflated their profits, these companies have increased their distributions by more than 66%, in the form of ordinary or extraordinary dividends, says Janus Henderson.
Oil, luxury and pleasure
Overall, 88% of the 1,200 companies included in the Global Dividend Index--the world's largest capitalisations--increased their profits.
Anglo-Australian mining giant BHP topped the list, followed by Brazilian oil company Petrobras and Microsoft, the first US company in the top 10, which includes seven US companies.
Twelve countries recorded record distributions in dollars, including the United States ($574.2bn), Brazil ($33.8bn) and China ($49.7bn). Emerging markets, Asia Pacific ex-Japan and Europe saw dividend increases of around 20%. France also recorded a record high with payouts of €59.8bn, surpassing the 2019 record by 4.6%. “The growth in the French total is notably due to the impressive increases recorded by companies in the luxury and automotive sectors.” French companies were the biggest contributors to European dividend growth: they accounted for almost a third of the annual increase.
$1.6trn mark in sight by 2023
For 2023, with inflation persisting and economic growth “already showing signs of slowing,” Janus Henderson expects earnings growth to slow. But even with growth of “only” 2.3%, the $1.6trn dividend mark will be reached and passed.
In 2023, the debates on the taxation of windfall profits as well as on the sharing of value with employees will have fuel. The taxation of share buybacks--another way of distributing the fruits of growth to shareholders--is becoming a topic of discussion and is being openly discussed by the Biden administration. Chevron and Exxon have matched their dividends with record share buybacks.
Not to mention the debate on war profiteers that should logically emerge when the bill for the Ukrainian crisis is presented.
This article was first published in French on Paperjam. It was translated for Delano.