Dividends paid by global companies are likely to increase to US$1.72 trillion in 2024 even though one-off special payouts may well decline from the record levels of the previous years, according to the latest global dividend index from Janus Henderson.

The annual analysis of the 1,200 largest firms by market capitalisation at December 31 forecasts that dividends will register headline growth of 3.9%, equivalent to underlying growth of 5%. 

This augurs well for local advisers seeking to capitalise on a potential rotation into stocks outside the growth companies that have pushed global markets to record highs.

“Our US Economics team expects the rate of economic growth to slow over the first half of 2024 and for interest rates to decline throughout the second half of the year. We think the combination of these factors may spur a rotation into high quality value stocks, especially those that pay attractive dividends,” said Morningstar US Market Strategist, Dave Sekera. 

“Looking forward, we expect market returns will broaden out from their current concentration in growth stocks as the growth category has begun to trade into overvalued territory,” Sekera said. 

The world’s biggest dividend payer in 2023 was Microsoft Corporation, followed by Apple Inc and Exxon Mobil Corporation. Hong Kong-listed China Construction Bank and PetroChina Company were the next biggest payers.

Mining giant BHP Group (ASX: BHP) was the only Australian company ranked in the top 20, holding down sixth position, according to Janus Henderson.

Sector breakdown

“Pessimism over the global economy proved ill-founded in 2023 and although the outlook is uncertain, dividends are well supported. Corporate cash flow in most sectors has remained strong and is providing plenty of firepower for dividends and share buybacks,” said Ben Lofthouse, Head of Global Equity income at Janus Henderson.

“The run-rate of US dividend growth in the fourth quarter bodes well for the full year. Japanese companies have embarked on a process of returning more capital to shareholders, Asia looks likely to pick up, and dividends in Europe are well covered,” Lofthouse said.

Most pundits expect the banking sector to remain the biggest global dividend payer in 2024, partly as a consequence of the higher interest rate environment. S&P Global anticipates that banks in almost all markets will increase to account for 16% of the aggregate payout with total dividends of US$345 billion. 

“European banks are noteworthy – Italian banks are set to distribute one of the largest increases even after the windfall tax in the summer of 2023. Similarly, Spanish banks are forecast to pay 22% more dividends in 2024,” wrote S&P Global analysts.

By contrast, payouts in both the oil and gas and industrial sectors are forecast to decline.

“The aggregate dividend from industrial goods and services will decline the most, by US$27.4 billion or down 12% year over year, reflecting the depressed sector sentiment globally. Heavy cuts in regular dividends are coming from the shipping players in Germany, Denmark, Taiwan, Japan and Hong Kong as freight prices soften from the COVID-19 peak,” according to S&P Global.

“The latest projection shows that the payout from global oil and gas players will shrink by 3.4% in 2024,” its team wrote.

Individual standouts

Morningstar went beyond those sectors when nominating individual companies which fall into the category of global high-quality dividend paying stocks.

Its preferred dividend picks include global biopharmaceutical company Bristol Myers Squibb (4.6% forward dividend yield), Swiss-listed pharma giant Roche (+4% dividend yield) and Hong Kong-listed CK Infrastructure Holdings (5.6% dividend yield).

“Roche is the leader in the biotech space. It has a strong pipeline of drugs to support future revenue and earnings growth and pays a generous dividend, the yield of which is north of 4%,” said Morningstar’s Europe Market Strategist, Michael Field.

“There is plenty of upside to the share price, so investors buying for the dividend shouldn’t lose money on the capital side,” Field said. 

Advisers should also expect less one-off global dividends in 2024, with S&P Global predicting that special/variable dividends will be halved.

Janus Henderson’s Lofthouse expressed a similar view: “One-off special dividends are by their very nature unpredictable but they are unlikely to sustain the record levels we have seen over the last three years. So we assume these will fall to levels more in line with the pre-pandemic average of around US$45 billion.”