Dividends from the largest companies hit a record $326 billion in the first quarter

Dividends issued by the world’s largest listed companies in the first quarter set a record this year, even as prominent investors and asset managers warned of an impending global economic slowdown.

According to fund manager Janus Henderson’s quarterly report, the world’s 1,200 largest public companies collectively issued $326.7 billion in dividends in the first quarter of 2023, a 12 percent increase compared to the same period last year.

Payouts to shareholders were boosted by the largest special dividend contribution in nine years, as companies including carmakers Ford and Volkswagen made one-off contributions.

The rise reflects the durability of corporate earnings, even as stock markets around the world tumbled over Russia’s invasion of Ukraine, high energy prices and rising interest rates.

Fund managers also expressed concern over the company’s record $1.3 billion in share buybacks last year, which some saw as an alternative to dividends, arguing that shareholders did not benefit as much as management.

Ben Lofthouse, head of global equity income at Janus Henderson, said the growth was “impressive given the challenges facing the global economy in 2022”.

Stripping out special payments and currency movements, Janus Henderson said global dividends rose 3 percent in the first quarter and forecast total dividends would rise 5 percent to $1.64 billion in 2023. According to Lofthouse, the banking and oil industries are likely to be the biggest payers.

Mark Donovan, senior portfolio manager focusing on U.S. large-cap stocks at Boston Partners, suggested that the rise in corporate dividends reflects a “growing acceptance” that management must weigh the benefits of reinvesting profits in the company against returning profits. to the shareholders.

“Energy is a good example of the bias many executives have had over the years to put money back into projects, many of which produced low returns and ultimately led to poor share price performance,” he said.

“These executives realized that raising dividends and increasing buybacks was a better way to enrich shareholders and ultimately keep their jobs.”

Janus Henderson said British dividends rose 6 percent to $15.3 billion in the first quarter, thanks to payments from oil companies, airlines and contract catering company Compass, which pushed dividends close to pre-pandemic levels amid strong demand.

According to Janus Henderson, the United States was responsible for nearly half of corporate dividends issued in the first quarter of 2023, with real estate, technology and healthcare also driving growth. Mining companies’ dividends have decreased due to the drop in raw material prices.

Earlier this month, Goldman Sachs forecast a 5% rise in dividends this year, adding that even in a recessionary scenario, dividend payouts could be reduced only slightly because they are the “stickiest” next to research and development spending.

Daniel Peris, fund manager at Federated Hermes and author of “The Strategic Dividend Investor,” predicted that dividends would grow in popularity, including among technology companies, as companies scale back share buybacks and compete to win investors over a in a harsher environment.

“The challenge for investors will be to determine which companies can afford it – which are well-positioned for the new cash-based capital markets paradigm – and which are not,” he added.

Additional reporting by Chris Flood