Global dividends reached a record high in Q2 with contributions from major banks and auto manufacturers. Healthcare companies led dividend growth in the US. Janus Henderson reports biggest dividend cuts in North America.
Troy D. Hanson
August 30, 2023
Global dividends reached a record high in the second quarter, with a significant contribution from major banks. According to the Janus Henderson Global Dividend Index, second-quarter dividend payouts saw a 4.9% increase to reach $568.1 billion. Janus Henderson's quarterly index tracks dividends from 1,200 companies worldwide, revealing that 88% of these companies either increased their dividends or maintained them during the quarter.
Banks Lead Global Growth
The report highlights that bank dividends played a crucial role in driving global growth during the quarter. Rising interest rates boosted margins, allowing banks to contribute to half of the global growth. Additionally, pandemic-related disruptions to dividend payments have started to dissipate, further contributing to the positive growth in this sector. Alongside banks, auto manufacturers also played a part in boosting dividend growth.
U.S. Dividend Growth Slows
In the United States, dividend payments by companies saw a more modest increase of 2.6% to reach $148 billion. However, this marks the sixth consecutive quarter of slowing dividend growth in the country. Janus Henderson notes that despite the slowdown, U.S. companies have demonstrated exceptional resilience throughout the pandemic compared to other parts of the world which experienced significant cuts in dividends.
Healthcare Leads U.S. Growth
Healthcare companies emerged as the primary drivers of dividend growth in the U.S during the second quarter. UnitedHealth Group and Eli Lilly led the way in this sector. UnitedHealth Group exceeded expectations with their earnings report in July and raised their outlook for the rest of the year. Similarly, Lilly surpassed revenue estimates for the second quarter and increased their guidance for full-year non-GAAP earnings earlier this month.
Overall, global dividends experienced significant growth in Q2, aided by the strong performance of banks and auto manufacturers. While U.S. dividend growth has slowed down, companies in the country have demonstrated resilience amidst the challenges posed by the pandemic. Healthcare companies emerged as key contributors to dividend growth in the U.S. during this period.
Janus Henderson Reports Biggest Dividend Cuts in North America
Janus Henderson recently revealed that the two largest dividend cuts in North America were made by Intel (INTC) and Blackstone (BX).
Despite this, the second quarter proved to be strong for dividend payments overall. However, the firm warned that economic growth is slowing as a result of higher interest rates.
According to Ben Lofthouse, head of global equity income at Janus Henderson, global profits are now expected to remain flat this year after reaching record highs in 2022. As a result, companies worldwide are becoming more cautious about their outlook.
Looking forward, Janus Henderson still anticipates strong dividend growth for this year, with an increase of 5.2% on a headline basis to $1.64 trillion. This corresponds to an underlying growth rate of 5.0%.
Lofthouse expressed confidence in most regions and sectors meeting their dividend expectations. He particularly highlighted the banking sector, emphasizing its potential for solid growth throughout the remainder of the year, which may result in record payments to shareholders.
While a weaker economic environment typically has a negative impact on banks, Lofthouse explained that the end of years of ultralow interest rates has been incredibly powerful in terms of driving dividend payouts and boosting bank margins.
Dividends have long been a cornerstone investment strategy for many portfolios. However, some investors have begun favoring growth-focused tech stocks that typically do not pay dividends. Dividend-paying companies also face competition for investor attention due to attractive yields on government bonds.