Energy and banking sectors boost dividends to record levels as commodity prices surge and interest rates continue to rise

Booming commodity prices helped global dividend payouts reach record highs and exceed pre-pandemic volumes last quarter, new data has revealed.

Shareholders received $544.8billion of dividends between April and the end of June, compared to a previous second-quarter peak of $509.1billion three years ago, according to the latest Janus Henderson global dividend index.

The figure was also 11.3 per cent up on a headline basis from the same time in 2021 when much of the world was still subject to very tight Covid-19 restrictions while the global economy was steadily recovering.

Black gold: Booming oil and gas prices helped global dividend payouts reach record highs and exceed pre-pandemic volumes last quarter, according to fund manager Janus Henderson

Oil and gas producers more than doubled their dividend payments to $40.6billion as the rebound in travel and the Ukraine war continued to push energy prices even higher.

Brazilian state-owned corporation Petrobras was the world’s biggest dividend payer during the period, driving much of the gains in emerging markets dividends, as did Colombian group Ecopetrol.

Financial services companies were responsible for another two-fifths of the yearly increase in dividends, aided by central banks, particularly in the UK and Europe, lifting restrictions on stockholder payouts.

UK dividends received a further boost from Aviva declaring a special dividend in response to pressure from Swedish activist investor Cevian Capital.

This made the insurer one of three London-listed businesses on the top 20 dividend payers list, alongside HSBC Holdings and mining giant Rio Tinto, which paid out £12.6billion in April – the second greatest dividend in FTSE 100 history.

Glencore, Anglo American and Antofagasta also rewarded shareholders with bumper payouts earlier this year on the back of surging prices for critical metals and minerals, like iron ore, copper and coal.

Industry: The oil, gas and energy sector saw the strongest headline growth in dividends, but the consumer discretionary industry, which includes leisure, clothing, and general retail firms, achieved the best underlying expansion of 67.5 per cent

Yet, with the exception of Glencore, all blue-chip listed British mining firms have announced dividend cuts in the past month following a slump in earnings caused by a sharp decline in commodity prices.

With major economies now heading for significant slowdowns, there are concerns about investors’ reliance on energy industries for dividend growth.

Dan Kemp, global chief investment officer at Morningstar’s Investment Management group, said equity income funds could become ‘more and more dependent on what is essentially a very cyclical industry.’

The scale of recent dividend payouts could also trigger more calls for windfall taxes on oil and gas profits, although analysts say that bigger dividend payments are a boost to the many pension funds that own energy shares.

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‘We would say that companies paying out dividends to shareholders is preferable from an environmental sustainability view than reinvesting into new oil and gas production that contributes to yet further global warming,’ said Mike Coffin at Carbon Tracker, a financial think-tank.

The oil, gas and energy sector saw the strongest headline growth in dividends, but the consumer discretionary industry, which includes leisure, clothing, and general retail firms, achieved the best underlying expansion of 67.5 per cent.

German carmakers Mercedes Benz Group and Volkswagen tripled their payouts while BMW upped its dividend by half, and Hanover-based tiremaker Continental gave out its first payment in three years after bouncing back to profit.

By comparison, the communications and media sector recorded the largest fall in dividends due to a cut by AT&T, which had been the world’s second biggest payer in 2019 and 2020.

Janus Henderson said total dividends still surpassed its expectations, but it warned that slowing economic growth and the strengthening US dollar would be significant headwinds in the second half of the year.

The asset manager predicts global dividend payments will total $1.56trillion in 2022, a 5.8 per cent rise year-on-year, before abating in the following 12 months as the momentum from post-Covid catch-up payments comes to a close.

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