Copyright © BusinessAMBE 2023

According to a report by asset manager Janus Henderson, 2023 was a top year for dividend investors. The listed companies surveyed increased that profit distribution by more than 4 percent this year.

Those who invest in stocks typically receive a dividend. That is a portion of the profits that a listed company pays out to its shareholders. After all, they are co-owners of the company.

In the news: Janus Henderson each year sheds light on the dividend policies of 1,200 multinationals. That survey was conducted for the 40th time this year. And what did it reveal? 2023 was a record year for dividends.

  • The 1,200 surveyed paid $1,630 billion in dividends this year. That's a 4.4 percent increase over 2022.
  • 89 percent of those companies increased or maintained their dividends. Looking only at the United States, that figure even rises to 98 percent.

Decline in third quarter

Details: In the third quarter, earnings payouts fell 0.9 percent to $421.9 billion, down from $425.8 billion in the same period a year earlier. Michel Ernst, strategist at KBC, notes in an analysis that there are big differences between sectors.

  • "For example, there were significant dividend cuts in the mining sector (basic materials), where more than half of mining companies cut their payouts," he echoes.
  • "There was also a decrease in dividends paid by the oil, gas and energy sectors, which saw their payouts rise in 2022 due to rising energy prices," the expert continued.
  • Janus Henderson also noted a decline in dividends in the chemicals and real estate sectors, especially in Asia Pacific excluding Japan, with real estate companies in Hong Kong in particular.

Noted: Financial institutions, on the other hand, remain generous.

  • They paid $104.4 billion in dividends last quarter. No sector did better.
  • "Banks around the world are benefiting from the increase in their net interest margins due to the strong interest rate hikes decided by central banks," Ernst clarified.

Also this: Europe saw robust dividend growth in the third quarter, while the U.S. was status quo.

  • Earnings distributions in Europe came to nearly $25 billion, up 34 percent from Q3 2022.
  • In the U.S., multinationals paid out $162 billion in dividends. That is a significant amount, but only 0.3 percent more than a year earlier.
  • In Asia Pacific (excluding Japan) and the UK, dividend payments fell 10 and 5 percent, respectively.

What will 2024 bring?

Outlook: Ernst notes that 2024 will be a challenging year as certain regions may end up in recession.

  • "Corporate cash flow will therefore come under pressure as demand falls and the cost of debt rises (due to higher interest rates), which could limit the scope for dividend growth," he clarifies. "Without having a crystal ball, the sectors that will be hardest hit are likely to be the more cyclical sectors, such as basic materials, consumer cycles, industrial companies and companies in the energy sector."
  • Still, he thinks dividend flows will remain strong in 2024: "Many companies have a solid balance sheet structure and can afford to draw on their reserves, if necessary, to at least maintain their dividends, pending an improvement in the economic environment."

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