Europe carries new record in global dividends for Q2

The latest Janus Henderson Global Dividend Index figures have revealed Europe as the key driver behind the record $606.1 billion in global dividends recorded for the second quarter.

Payouts surged by 8.2 per cent on an underlying basis, with the European region marking an all-time record of $204.6 billion in dividends and 7.7 per cent growth year-on-year. France, Italy, Switzerland and Spain all hit new records, with over 50 per cent of the growth attributed to banks considering the current high interest rate environment.

The index showed that while American companies such as Meta and Alphabet initiated the upswing in Q2 dividend payments, boosting the global growth rate by 1.1 per cent and contributing 40 per cent to the US’ 8.6 per cent growth in dividends, it still remained a global effort as 92 per cent of companies either raised dividends or kept them steady.

While Japan saw a new record when comparing payouts on an underlying basis, its current weak exchange rate meant dividend dollar value suffered. The index indicated that Australia and Hong Kong came in at the lower end, while Singapore, Taiwan and South Korea had double-digit growth.

“We had optimistic expectations for the second quarter and the picture was even brighter than we predicted thanks to strength in Europe, the US, Canada and Japan,” Jane Shoemake, Client Portfolio Manager on the Global Equity Income team at Janus Henderson, said.

“Around the world, economies have generally borne the burden of higher interest rates well. Inflation has slowed while economic growth has been better-than-expected. Companies have also proved resilient and in most industries continue to invest for future growth.

“This benign backdrop has been especially positive for the banking sector, which is enjoying strong margins and limited credit impairments, which has bolstered profits and generated a lot of cash for dividends.”

Janus Henderson said banks (particularly in Europe) were once again paving the way for higher payouts, contributing one third of the underlying year-on-year increase; insurers, vehicle manufacturers (especially in Japan) and telecoms also played key roles in Q2’s figures.

“The initiation of dividends from big US media-technology companies Meta and Alphabet, along with China’s Alibaba among others, is a really positive signal that will boost global dividend growth by 1.1 percentage points this year,” Shoemake said.

“These companies are following a path well-trodden by growth industries over the last couple of centuries, reaching a point of maturity where dividends are a natural route for returning surplus cash to shareholders. In so doing they have confounded sceptics who said this group of companies was different.

“The stock market simply evolves over time as industries rise and fall as they meet the changing needs of society. Paying dividends will also broaden their appeal to investors for whom dividends are a vital part of their investment strategy and it may also encourage more companies to follow suit.”

The fund manager also announced it has revisited its forecast for 2024’s dividends and is projecting global companies to pay a record $1.74 trillion, a 6.4 per cent increase on an underlying basis year-on-year and up from five per cent from its Q1 report.