The Global Dividend Index developed by Janus Henderson showed that the rise in dividends paid by European multinationals has largely benefited from the lifting of bank dividend restrictions by central banks. Photo: Shutterstock

The Global Dividend Index developed by Janus Henderson showed that the rise in dividends paid by European multinationals has largely benefited from the lifting of bank dividend restrictions by central banks. Photo: Shutterstock

Dividends paid by multinational companies have been pushed to a new record high by the post-pandemic economic recovery. Regionally, Europe contributed most to this increase. However, the expected decline in global growth will slow the rise in dividends in 2023.

The British-American asset manager Janus Henderson has published its annual “Global Dividend Index”, a long-term study of global dividend trends. Specifically, the index, denominated in dollars, measures the evolution of dividends paid by multinational companies to their shareholders, based on a breakdown by world region and industry.

Overall, this year’s Janus Henderson showed that dividends peaked in the second quarter of this year at $544.8bn. This reflects a +11.3% increase in dividends globally. In addition, 94% of the companies measured by the index increased or maintained their dividends.

The significant increase in global dividends has helped to offset the losses incurred by multinationals throughout the pandemic. The report explained that the Global Dividend Index has rebounded to its pre-pandemic trend.

European engine

The record second quarter performance was driven by the European region. “Europe and the UK were key drivers in Q2 with strong growth in this seasonally important quarter,” the paper noted. In this regard, European and UK corporate dividends grew by +28.7% and 29.3% respectively. Together, continental European and UK multinationals generated $165.8bn in the second quarter.

The increase in dividends generated by European companies was mainly due to dividends paid by financial institutions. This is because central banks have lifted restrictions on bank dividends following the covid-19 pandemic. Dividend increases from German car manufacturers also contributed to the European record.

At the country level, Janus Henderson’s report stated that Swiss and Dutch dividends set new records.

Downward expectations

However, there is one principle that prevails in the investment world: past performance is no guide to future performance. And Janus Henderson was keen to point out: “The second quarter was slightly ahead of our expectations, but the headwind from the strength of the US dollar will reduce momentum in the second half of the year, as will the slowdown in global economic growth.”

As a result, the asset manager predicted that by 2023, the dividend increase resulting from the post-covid-19 global recovery will already be a thing of the past. In addition to the expected decline in global GDP, Janus Henderson forecast that dividends from mining companies are at historic lows and will not rise again. This adds to the list of headwinds that are buffeting the financial markets. Global dividend growth is expected to continue in 2023, but is expected to slow.

Originally published in French by and translated for Delano

Related articles