Dividends Romp in the 2nd Quarter, But Don’t Get Used to It

For dividends, these are the good old days. Payouts globally and domestically reached records in the second quarter, a study by asset manager Janus Henderson found. But the investment management firm projected that gathering economic problems will slow those increases come 2023.

In the U.S., total dividends jumped 8.3% from the previous quarter, to just over $144 billion, according to the study. Growth was even stronger in Europe, rising 15.1% to $166 billion. That’s largely because the U.S. didn’t throttle back payouts as much as Europe in pandemic panicked 2020, preferring to ax stock buybacks, which are a bigger deal in America. Dividends shrank 11% worldwide in 2020, shriveled 32% in Europe and rose a mere 3% in the U.S. So, the Europeans have had to make up for lost ground.

Globally, dividends advanced 11.3% in this year’s second quarter, to $545 billion.

The burgeoning dividends came amid a large increase in corporate revenue and earnings that followed the early-2020 outset of the coronavirus plague. But new doubts about the economy’s path—the U.S.’s first two quarters saw gross domestic product contract, inflation skyrocket and war erupt in Europe—trigger questions about whether the dividend bonanza will continue.

This year’s second half is likely to experience a dividend expansion slowdown, wrote Ben Lofthouse, head of global equity income at Janus Henderson, in a commentary accompanying the report. Lofthouse predicted that “the rest of the year is unlikely to see such strong growth” as in January through June. “Many of the easy gains have now been made as the post-Covid-19 catch-up is almost complete.”

What’s more, dividend growth should peak in 2023 and turn slower, he said. Lofthouse pointed out that actual contraction of dividend payments economy-wide was unlikely up ahead. “One-off special dividends become scarcer during times of economic weakness, but regular dividends tend to have an element of downside protection,” he wrote. Companies seldom lower their dividends unless things look very dicey.

AT&T, which halved its dividend earlier this year, after it spun off WarnerMedia, is an outlier, in Janus Henderson’s estimation. The telecom company still has a very generous dividend yield, 6.1%,

In 2022’s second quarter, oil producers contributed over two-fifths of the global dividend growth year-on year, thanks to high oil prices. Close behind them were banks and other financial services companies.

Worldwide, Brazilian energy giant Petroleo Brasileiro was the most generous dividend provider, in terms of total money spent on payouts. Microsoft was in ninth place globally and was the largest U.S. dividend payer.