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

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Dividends issued in the first quarter by the world’s largest publicly traded companies hit a record high this year, even as leading investors and wealth managers are warning of an imminent slowdown in the global economy.

The world’s 1,200 largest public companies collectively issued $326.7 billion in dividends in the first quarter of 2023, up 12% from the same period a year ago, according to a quarterly report from fund manager Janus Henderson.

Payments to shareholders were supported by the largest contribution in nine years from special dividends, as companies such as automakers Ford and Volkswagen made one-off contributions.

The increases reflect the duration of corporate earnings even as stock markets around the world have collapsed due to the Russian invasion of Ukraine, high energy prices and rising interest rates.

Fund managers have also expressed concern about record $1.3 trillion in share buybacks that the companies pledged last year, seen by some as an alternative to dividends, citing concerns that they would not benefit shareholders as much as corporate management.

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

Excluding special payments and exchange rate changes, Janus Henderson said global dividends rose 3% in the first quarter and he forecast the total to rise 5% to $1.64 trillion in 2023. Lofthouse said said the banking and oil industries are likely to be among the biggest payers.

Mark Donovan, senior portfolio manager at Boston Partners who specializes in US large-cap stocks, suggested that the increase in dividend payments from companies reflects a “growing acceptance” that management needs to weigh the benefits of reinvesting profits in the company together with the returned earnings. to the shareholders.

“Energy is a prime example where for years and years many executives have been biased into reinvesting money in projects, many of which have yielded low returns and ultimately led to poor stock price performance,” he said.

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

Janus Henderson said UK dividends rose 6% to $15.3 billion in the first quarter, driven by payouts from oil companies, airlines and contract catering firm Compass, which reported the dividend close to pre-pandemic levels in the face of strong demand.

The United States was responsible for nearly half of corporate dividends issued in the first quarter of 2023, Janus Henderson said, with real estate, technology and healthcare also driving growth. Mining company dividends declined due to falling commodity prices.

Earlier this month Goldman Sachs predicted dividends would rise by 5% for this year, adding that even in a recession scenario, dividend payouts should fall only slightly, as they’re the “stickiest” along with research spending. and development.

Daniel Peris, a fund manager at Federated Hermes and author of “The Strategic Dividend Investor,” predicted that dividends would rise in popularity, even among tech companies, as companies cut back on share buybacks and competed to attract investors in a more difficult climate.

“The challenge for investors will be determining which companies can afford to do this – they are well positioned for the new liquidity-based capital markets paradigm – and which cannot,” he added.

Additional reporting by Chris Flood