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World’s biggest dividend payer named as bank payouts boom

Income investors have had another excellent year, but which companies, sectors and regions have been most generous? Graeme Evans runs through all the info in this popular annual dividend report.

13th March 2024 15:48

by Graeme Evans from interactive investor

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Microsoft Corp (NASDAQ:MSFT) is back as the world’s biggest dividend payer after a year in which HSBC Holdings (LSE:HSBA) surged up the rankings as part of a big jump in bank sector distributions.

Janus Henderson said global investors received a total of $1.66 trillion (£1.3 trillion) in 2023, up 5.6% on a headline basis, or an underlying improvement of 5% when excluding one-off awards, currency moves and calendar effects.

The banking industry contributed half the world’s dividend growth as the higher interest rate environment enabled many lenders to increase their margins.

This was particularly the case for HSBC investors after its return to a quarterly payment schedule led to the largest dividend increase in the world in 2023, up $5.1 billion (£4 billion).

The Asia-focused lender, which was largely responsible for the 22.6% fourth-quarter growth in UK payouts, ranked 14th for the year as it made its first entry in the world’s top 20 since 2019.

There was no return to the annual list for Shell (LSE:SHEL), BP (LSE:BP.) or Rio Tinto Registered Shares (LSE:RIO), but former FTSE 100 stock BHP Group Ltd (LSE:BHP) did feature in sixth place, having been the top payer in 2021 and 2022.

A double-digit increase in the Microsoft payout meant it beat fellow Magnificent Seven stock Apple Inc (NASDAQ:AAPL) and Exxon Mobil Corp (NYSE:XOM) to the top spot, a position it previously held in 2020.

Source: Janus Henderson Global Dividend Index.

Collectively, the technology sector was still the most important driver as overall US payouts in 2023 reached $602.1 billion (£470.5 billion) for underlying growth of 5.1%.

Wall Street dividends have grown every year since 2011, even through the pandemic, and are now three times larger than in 2010.

Globally, 86% of companies either increased dividends or held them steady, but large cuts from just five companies – BHP, Petroleo Brasileiro SA Petrobras ADR (NYSE:PBR), Rio Tinto, Intel Corp (NASDAQ:INTC) and AT&T Inc (NYSE:T) – reduced the global underlying growth rate by two percentage points.

The biggest negative impact came from the mining sector, whose payouts fell by 11.5% to $23 billion (£18 billion) when including the impact of special dividends. This offset most of the increase provided by higher banking dividends.

HSBC, China Construction Bank and JPMorgan Chase & Co (NYSE:JPM) accounted for one-sixth of the world’s banking dividends. Beyond the “unusually large” movements in banking and mining, Janus Henderson reported encouraging growth from industries as varied as vehicles, utilities, software, food, and engineering to highlight the importance of a diversified portfolio.

Vehicle manufacturers delivered one-eighth of the world’s dividend growth in 2023, or one-fifth if large special dividends from Volkswagen AG (XETRA:VOW) and Ford Motor Co (NYSE:F) are included.

Utility payouts also rose to a new record, up 10.1% as most power generators and distributors have benefited from higher energy prices.

Despite an uncertain outlook, Janus Henderson is predicting 3.9% growth in total dividend payments for 2024 to $1.72 trillion (£1.34 trillion). This equates to underlying growth of 5%.

The asset management group pointed out that dividends look well supported and that they have historically shown significantly less variability than profits.

It added: “From a sector perspective, even though the rapid growth we have seen from banks around the world is going to slow this year, the rapid declines from the mining sector are also likely to make less of an impact.

“Energy prices remain firm so oil dividends look well supported and the big defensive sectors like healthcare, food and basic consumer goods should continue to make steady progress.”

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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