2024, the year of excess: dividends explode despite sectors in crisis

© Burak The Weekender/Pexels

The year 2024 will go down in history as the year of all paradoxes in the financial markets. While the global economy is going through a period of uncertainty (persistent inflation, slowing growth, trade conflicts, etc.), shareholders have never been so rewarded.

According to the latest report from Janus Henderson (JHGDI), global dividends reached a staggering $431.1 billion between July and September, an increase of 3.1% year-on-year. A level never seen before for a third quarter.

The top of the basket

North America confirms its status as a global locomotive with a spectacular increase of 8.7% in payments, totaling 176 billion dollars over the quarter. ” In the rest of the world, the entry of Meta and Alphabet [Editor's note: parent company of Google] into the circle of dividend-paying companies has given a significant boost to already robust growth in the United States, where 96% of companies have increased or maintained their payments compared to the previous year ” we can read on the seventh page of the report.

The communications and media sector is also doing very well. The latter thus recorded a dizzying progression of 29.5%, boosted by another large well-known company, Walt Disney, “which resumed its payments this year after the interruption caused by the pandemic”, explains the JHGDI.

Steady growth in global dividends (2009-2024), with a marked increase in regular and exceptional payments. © JHGDI

A geographically contrasted redistribution of wealth

The global map of dividends in 2024 reveals highly differentiated regional dynamics. Banking institutions, historical pillars of dividend distribution, confirm their dominant position by representing 20% ​​of total global payments. Their remarkable performance, with a 6.3% increase in dividends, is explained in particular by the rise in interest rates which has boosted their intermediation margins, as well as by balance sheets that have been cleaned up since the financial crisis of 2008.

Europe, although solid in its fundamentals, displays a marked seasonality. The third quarter, traditionally the weakest due to the timing of payments by continental companies, nevertheless totaled €51 billion in dividends. This low period is explained by the usual concentration of payments in the second quarter, when European companies distribute their annual dividends after their spring general meetings. To put these figures in perspective, this amount represents barely 21% of the payments in the previous quarter, which had reached €241 billion.

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The Asia-Pacific region draws a more complex landscape. The overall decline of 3.9%, bringing dividends to $73.7 billion, masks very diverse national realities. China, despite its economic slowdown and its real estate crisis, sets a new record, driven by the spectacular entry of Alibaba into the circle of dividend-paying companies.

India, for its part, continues its meteoric rise. The world's largest democracy is enjoying exceptional economic growth, above 6%, which is translating into record profits for its companies. This has naturally resulted in a drastic increase in shareholder payouts.

The crumbling of raw materials

The raw materials sector is showing worrying signs: more than a third of companies have cut their dividends. “The weakest sectors were mining and transportation (part of the industrial group). Mining was particularly affected by cutbacks by Vale in Brazil and Glencore ” the report underlines on page fourteen. The transportation and chemical sectors, for their part, also show major signs of weakness.

Evolution of dividends by sector (2009-2024). © JHGDI

The sector's exceptional dividends fell by 33% to 6.3 billions of dollars, like the Norwegian oil company Equinor, which was forced to reduce its payments in the face of falling oil prices.

Despite these areas of #8217;shadow, Janus Henderson maintains optimistic outlook. Jane Shoemake, an analyst at the company, points out that ” Fears about the impact of high interest rates on the global economy have so far proven unfounded. » Strong corporate earnings suggest continued dividend growth through 2025, with a global forecast of $1.73 trillion for 2024, up 4.2% from 2023.

These record levels are cause for concern, but it is more the disparities between sectors that may raise questions. The coming quarters will show whether this pace will hold up over time, especially in an environment marked by high interest rates and persistent geopolitical tensions.

• Global dividends hit $431.1 billion in Q3, led by technology and banks.
• North America and Asia posted strong performances, while Europe remained affected by seasonality and the commodities sector declined.
• Despite economic uncertainties, dividend growth is expected to continue through 2025 with a forecast of $1.73 trillion.

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