The latest Global Dividend Index from Janus Henderson has revealed that Australian dividends suffered a 10.7 per cent decline on an underlying basis in 2023 to US$60.8 billion, on the back of large cuts in the dominant mining sector.
While three-quarters of Australian companies grew their dividends or kept them steady – short of the 86 per cent global average – their increases were too small to offset the big cuts from mining groups.
Australian banks were the strongest drivers of growth, alongside their global peers, however, cuts made by the likes of BHP, Petrobras, Rio Tinto, Intel, and AT&T reduced the global underlying growth rate for the year by 2 percentage points.
“Beyond the normal cyclical swings of the mining sector, Australian dividends continued to record healthy underlying growth,” Matt Gaden, head of Australia at Janus Henderson Investors, commented.
“Crucially, our Global Dividend Index highlights just how important it is for income-oriented investors to have diversification across industries and across geographies. The changing global cost of capital and shifts in supply chains underscore the importance for investors to closely monitor their impact on high dividend-paying shares,” Gaden continued.
Globally, dividends rose by 5 per cent on an underlying basis to a record US$1.66 trillion in 2023, while headline growth was 5.6 per cent for the year.
The global banking sector delivered record payouts in 2023 and contributed half of the world’s dividend growth, with Janus Henderson noting that emerging markets made a splash.
Australian banks also celebrated double-digit dividend growth as the higher interest rate environment enabled many banks to increase their margins.
Beyond banking and mining, the index identified encouraging growth from industries as varied as vehicles, utilities, software, food, and engineering, demonstrating the importance of having a diversified portfolio.
According to Janus Henderson, 22 countries saw record payouts in 2023, with Europe, excluding the UK, contributing two-fifths of the global increase.
Elsewhere, most developed countries in Asia-Pacific, excluding Japan, saw lower payouts year-on-year.
Janus Henderson forecasts dividends of US$1.72 trillion for 2024, up 3.9 per cent on a headline basis, equivalent to underlying growth of 5 per cent.
According to Ben Lofthouse, Janus Henderson head of global equity income, the lagged effect of higher interest rates will continue to have an impact, with slower global economic growth anticipated and higher funding costs for companies.
“We are nevertheless optimistic for dividends in the year ahead,” Lofthouse said.
“The run-rate of US dividend growth in the fourth quarter bodes well for the full year; Japanese companies have embarked on a process of returning more capital to shareholders, Asia looks likely to pick up, and dividends in Europe are well covered.”
From a sector perspective, Lofthouse noted that even though the rapid growth seen from banks around the world is going to slow this year, the rapid declines from the mining sector are also likely to make less of an impact.
Energy prices remain firm so oil dividends are affordable and the big defensive sectors like healthcare, food, and basic consumer goods should continue to make steady progress. What’s more, dividends are much less variable than profits over time.
