Shareholders in U.S. firms saw dividends grow by 4.6% on an underlying basis in the second quarter of 2023 and by 2.9% on a headline basis including special dividends, exchange rate effects and other technical factors.
Firms paid out $148 billion to shareholders with 98% of them increasing or holding payouts from the previous quarter according to the Janus Henderson Global Dividend Index, which noted that this was the sixth consecutive quarter of slowing U.S. dividend growth.
The industries driving dividend growth in the quarter were healthcare led by UnitedHealth Group and Eli Lilly, and real estate led by logistics property specialist Prologis.
Banks posted strong dividends globally, with some exceptions, and accounted for half the global growth in Q2 as rising interest rates boosted margins and pandemic-related disruption to dividend payments finally worked its way out of the numbers.
Meanwhile, global dividends grew 4.9% on a headline basis to a new record high of $568.1 trillion, while underlying growth was 6.3% with single annual payments from European companies dominating the growth. The region posted the fastest growth for dividends globally and paid out almost $185 trillion.
Globally, 88% of companies either increased dividends or held them steady in Q2.
Ben Lofthouse, head of global equity income at Janus Henderson said that economic growth is moderating globally in response to higher interest rates.
“Markets now expect global profits to be flat this year, after soaring to record highs in 2022, and companies around the world are now more cautious about the outlook,” he said. “While employment levels have remained very strong, parts of Europe have experienced technical recessions and policymakers everywhere are still intent on combatting inflation, even if it comes at the cost of output.”
However, despite the challenges, Lofthouse and his team are expecting robust dividend payments for investors in most regions and sectors.
“We believe the banking sector in particular will continue to deliver solid growth for the rest of the year, making record payments to shareholders,” he said. “A weaker economic environment is typically negative for banks, but the positive effect on bank margins from the end of years of ultra-low interest rates is very powerful and is driving dividend payouts. The big banks are very tightly regulated and so enter the downturn in a strong capital position.”
He added that dividend income is typically much less volatile than earnings.
“Payouts lagged behind profit growth last year and so may potentially exceed it this year,” he concluded.