Global equities growth coming in 2023: Plato

Yasmine Raso

Senior Journalist, Financial Newswire

16 January 2023

Despite the slowing pace of overall dividend growth after its post-COVID recovery, Plato Investment Management’s Global Income Report has forecasted global equities dividends to climb.

The Plato Global Shares Income Fund’s portfolio manager, Daniel Pennell, said the rise in global dividends in the wake of the COVID-19 pandemic has proved well for retirees and other income investors in particular.

“After 2020’s pandemic-driven income cuts, global investors have seen strong growth in dividends across 2021 (+12.8% in AUD), again in 2022 (+15.8% in AUD), and we expect this trend to moderate in 2023 as interest rate rises bite,” he said.

“However, we believe global shares will continue to provide Australian investors a great source of diversified income. In Q4 we continued to see some large companies, for example Microsoft Corp, Johnson & Johnson, and Proctor & Gamble, increase their dollar payouts. In addition, businesses like Volkswagen AG have recently paid out further special dividends.

“Across sectors, we’re also seeing some standouts for dividends. The big recent increases have been from energy companies, with the sector considerably outperforming all other sectors in 2022. Strong balance sheets, driven by the commodity rally, enabled increased payouts from businesses including Shell, BP plc and Exxon Mobil Corp. We think this strength can continue into 2023 with energy prices likely to remain elevated.”

Plato’s Dividend Cut Model has confirmed the chance of dividend cuts in global developed markets in the year ahead was below the long-term average, showing 11.2 per cent. Pennell said real estate and retail were the industry groups at the highest risk of cuts.

“Our modelling, which shows a benign risk of widespread dividend cuts in global developed markets, gives us great confidence in the year ahead for global dividends and continues to indicate a positive outlook for income,” he said.

“The small number of companies cutting to zero in Q4 (6.9%) remains at pre pandemic levels. This supports our house view of future dividend strength.

While many investors ignore the income potential in global equities, actively managed global equities portfolios continue to be a pillar of strength for income-seeking investors, importantly, providing diversification away from the traditional Australian income stocks and helping to mitigate concentration risk.”