Global dividend outlook stabilizes despite war in Ukraine

The global outlook for dividends has stabilized, defying fears that Russia’s invasion of Ukraine could lead to reduced payouts to shareholders, according to a widely watched industry report.

According to the Janus Henderson Global Dividend Index, the first quarter of this year saw a broad-based increase in corporate payouts across all sectors, led by oil and mining groups profiting from the resource boom.

The fund manager’s analysts expect steady dividend growth to continue in 2022, dispelling fears earlier in the year that sanctions and price hikes following the war in Ukraine could upend stocks. prospects.

Fund managers nevertheless warned that the outlook for dividends – which are a key source of income for many retirees, pension funds and charities – faces considerable uncertainty and is particularly vulnerable to a downturn in the commodities sector. .

“Growth has occurred on a very broad basis, across different sectors and geographies,” said Jane Shoemake, portfolio manager for global equity income at Janus Henderson.

However, she warned that “the global economy is currently facing a number of challenges – the war in Ukraine, rising geopolitical tensions, high energy and commodity prices, rapid inflation and an environment rising interest rates. . . These challenges also mean that much greater uncertainty is likely to affect business decision-making.

Investors looking for income have gone through a tumultuous time during the Covid-19 pandemic. Many companies cut payouts to shareholders to conserve cash in 2020 when the virus hit. Dividends rebounded last year to a record $1.47 billion, according to the Janus Henderson Index, which tracks payouts from more than 1,000 major companies. However, the 2021 recovery has relied heavily on certain sectors, notably mining companies that have been drained of cash thanks to soaring commodity prices.

Payouts from mining companies jumped 30% in the first quarter of 2022 from a year earlier, according to the index. The boost to resource groups has yet to work, Janus Henderson said. “Oil and metals prices have been propelled higher following the Russian invasion of Ukraine, which has helped sustain dividend growth in these sectors for now.”

Total dividends rose 11% to $302.5 billion, a record high for the normally calm first three months of the year. Janus Henderson expects payments for 2022 to reach $1.54 billion, an increase of 4.6%. Nearly 95% of companies in the fund manager’s index increased their dividends or remained stable in the first quarter.

Danish shipping company AP Møller-Maersk recorded the largest single dividend increase in the quarter, according to Janus Henderson, as it benefited from high shipping rates.

However, there are warnings that the dividend outlook is vulnerable if commodities cease to provide a growth engine. “There is a risk of lower dividends in the mining sector. If metal prices fall, as I expect, dividends could be significantly reduced. Dividend growth looks more certain in the healthcare and consumer staples sectors,” said Emma Mogford, fund manager at Premier Miton.

Link, the UK fund group, raised its forecast for UK corporate dividends in April. The tailwinds for oil and commodities groups have been particularly strong for the UK stock market, where these companies are well represented.

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