The latest Global Dividend Index from Janus Henderson Investors has found that Australian dividends suffered a 17.5 per cent decline during the third quarter of 2023.
Globally, dividends dipped by 0.9 per cent in Q3 to US$421.9 billion. Janus Henderson said that “steep cuts” across the mining sector contributed to the reduction in global dividends.
The global active asset manager reported that BHP, which ranked as the largest dividend payer globally in both 2021 and 2022, reduced its dividend by more than half in 2023. Dividend reductions were also seen at Fortescue Metals and Rio Tinto.
“The tougher market conditions for Australian and global miners masked an otherwise positive third quarter with almost every other sector seeing dividend growth,” commented Matt Gaden, head of Australia at Janus Henderson Investors.
“Investors often seek refuge in high dividend-yielding companies or sectors such as mining and banks, but it’s not always a sure thing.”
More than half of mining companies globally cut their dividends over the period. But Janus Henderson noted that this was offset by a 9.3 per cent lift in banking dividends as well as higher payouts across a wide range of sectors including utilities and vehicle manufacturers.
“The findings of our dividend index reinforce why global diversification is critical for Australian investors that are often dependent on dividends for income generation. This has become ever more important as the cost of food, fuel, housing and energy soars,” said Mr Gaden.
“Investors must grasp the nuances of dividends, their advantages and the potential risks tied to high dividend-paying shares for a successful investment strategy.”
One in five Australian companies included in the Janus Henderson Global Dividend Index reduced their dividend year-on-year. Meanwhile, dividend growth was observed for Australian banks (14 per cent) and oil companies (19 per cent).
When accounting for one-off special dividends, exchange rates and other technical factors, the index recorded modest underlying growth of 0.3 per cent.
Excluding BHP and Brazilian oil company Petrobras, the index was up by 5.3 per cent on an underlying basis, which Janus Henderson noted was in line with the long-term trend.
“Apparent weakness in Q3’s global dividends is not a cause for concern, given the large impact a handful of companies made,” said Ben Lofthouse, head of global equity income at Janus Henderson Investors.
“In fact, the level of growth and its quality look better this year than seemed likely a few months ago as payouts have become less reliant on one-offs and volatile exchange rates.”
Globally, nine out of 10 companies raised their payouts or held them steady during Q3, but Janus Henderson indicated that there was wide variation across sectors and countries.
