The third quarter proved to be a positive quarter for dividend-paying companies in the United States. According to a recent report by Janus Henderson, a UK-based fund manager, a staggering 98% of surveyed US companies either maintained or increased their dividend payouts, surpassing the global average of 89%. Despite concerns over economic prospects and the Federal Reserve's attempts to curb inflation through higher interest rates, US companies distributed $146.6 billion in cash during the third quarter alone.
Although the rate of growth in US dividends has slowed for the eighth consecutive quarter, Janus Henderson predicts that a record payout for 2023 is still a possibility. Notably, Microsoft (MSFT) and Oracle (ORCL) were responsible for 20% of the $3 billion increase in US third-quarter dividends. Additionally, the revival of payouts from Southwest Airlines (LUV), Las Vegas Sands (LVS), and Delta Airlines (DAL) following pandemic-induced interruptions accounted for approximately 15% of the overall increase.
Conversely, the global dividend total experienced a decline of 0.9% in the third quarter, amounting to $421.9 billion. This decrease can be attributed to reduced payouts from several resource groups. Within the mining sector specifically, dividends fell by 36.9% on an underlying basis, representing four times the decline witnessed in any other sector. Disturbingly, over half of all mining companies reduced their distributions compared to the previous year.
In conclusion, while global dividends faced a slight setback, US companies managed to outperform the global trend during the third quarter. The strong performance of key players such as Microsoft and Oracle, coupled with the resurgence of payouts from major airlines, contributed significantly to this positive outcome.
Global Dividends Report: Q3 2021 Highlights
The latest Global Dividends Report reveals the impact of major reductions in dividends by Brazilian energy giant Petrobras BR:PETR4 PBR and Australian miner BHP AU:BHP BHP. However, banking dividends experienced a significant increase of 9.3% on an underlying basis worldwide. Additionally, numerous sectors, including utilities and vehicle manufacturers, saw rising payouts.
Positive Trends Amidst Weakness
Ben Lofthouse, head of global equity income at Janus Henderson, believes that despite the apparent weakness in Q3's global dividends, there is no cause for concern. He highlights that the level and quality of growth this year appear better than expected a few months ago. Notably, payouts have become less reliant on one-off special dividends and volatile exchange rates.
Lofthouse also emphasizes that the fluctuation of commodity dividends with the cycle is well-known and expected by investors. Therefore, the current weakness does not indicate a broader problem in the market.
China's Generosity Shines
Chinese companies demonstrated their financial generosity by raising payouts by 7.8% on an underlying basis, reaching a record high of $38.2bn. PetroChina HK:857 played a significant role in this achievement by more than doubling its dividend year-on-year to $6.5bn, making it the second largest payer worldwide during the third quarter. Meanwhile, China Construction Bank secured the top position, with compatriot China Mobile ranking third.
These developments underscore the complex dynamics at play in the global dividends landscape, where some players experience setbacks while others soar to new heights. Understanding these trends is essential for investors navigating the ever-changing financial market.
