A historic shower of dividends falls on shareholders around the world. In 2023 it set a record for the second consecutive year, reaching the figure of 1.52 trillion euros, which is almost equivalent to the wealth that is produced in one year in Spain with an increase of 5% compared to 2022.
This increase is the reflection of the business bonanza: the more cash the companies get, the more money they have to distribute. Being able to buy back shares, pay off debt, or launch into merger operations, more and more firms choose to keep their shareholders happy. This is what emerges from the latest study on the matter by the investment bank Janus Henderson, which has become a benchmark in this area in recent years.
The cast was historic in 22 countries, including the United States, France, Germany and Italy. On a global scale, 86% of companies increased or maintained remuneration, so we are talking about a general trend. Almost half of the increase comes from the banking sector. Half of the rise in global dividends is attributed to banking.
Higher interest rates have meant much better net interest margins for banks and that has meant more profits. It should not be forgotten that the entities have suffered for years in an environment of interest rates close to zero, so this is a big change for the sector. Dividends are the result.
“Dividends are a kind of hygiene factor: a company with a healthy cash flow after covering its investment needs should try to pay out surplus capital to shareholders. If a company is growing and its cash flow is also growing, dividends can grow and the share price can also increase over time,” Ben Lofthouse, head of Global Equity Income at Janus Henderson, told this newspaper.
In this context, investing in companies that distribute dividends can be a strategy that guarantees stable profits over time. But could companies have allocated surplus cash to other options or uses? According to Lofhouse, “dividends and share buybacks are not one thing or the other. Many companies choose to strike a balance between the two. Some only pay dividends. And some just do buybacks. Many companies (especially in the US, UK, Australia and parts of Europe) like to use progressive dividend policies, meaning they increase them or, in a bad year, keep them flat. The crucial issue is that they must be sustainable.”
If you look at the companies, a big boost to this distribution of money came from Microsoft, Apple, Exxon and China Construction Bank. On the opposite side, of the few that cut dividends, only five companies stand out, including Petrobras, Rio Tinto, Intel, AT
Regarding Europe, companies from the Old Continent were responsible for 40% of the global increase. Specifically, in Spain, not a single company cut the dividend, but remunerations soared by 29.3% and quadrupled the global rate. A total of around 21,000 million euros were distributed, the highest figure since 2019.
Of particular note is the percentage of growth originating from financial institutions – 40% -, followed by a significant contribution from electricity companies.
However, airport operator Aena was the biggest contributor to the growth of Spanish dividends, as last year the company restored remuneration to shareholders for the first time since the pandemic.
For 2024, the trend is not clear, but Lofhouse remembers that dividends tend to grow over time. “These records will be broken.”
