Dividends hit record payout. Thank oil companies.

  • By Lawrence C. Strauss,
  • Barron's
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Third-quarter global dividends increased by 7% to $416 billion, lifted by energy companies.

That sector has benefited from higher oil prices, though prices have come off their highs earlier in the year.

Overall, it was a record dividend payout for the third quarter.

Still, without the $19.9 billion increase in dividends from oil companies over that three-month period, it would have been flat year over year for the entire market, according to Janus Henderson Investors.

The asset manager, which releases a quarterly survey of global dividends, tracks the payouts of the largest 1,200 companies by market capitalization.

Among the energy companies that boosted their payouts during the third quarter were Devon Energy (), Pioneer Resources () and Diamondback Energy ().

Dividend growth did occur in the third quarter in local currencies across every region that the survey tracks, including Europe, emerging markets, Japan, Asia Pacific and the U.K. Without any currency adjustment, third-quarter dividends grew by 10.3% versus the same period a year earlier.

In dollar terms, however, some regions had negative results owing in part to the strong dollar.

Adjusted for currency translation and other factors such as special dividends, dividends fell in the U.K by 6.4%, for example, and were down minus 10.1% in Europe.

Meanwhile, U.S. dividends grew by 6.7% in the quarter, helped by banks and other financial firms.

Those included Morgan Stanley () and Bank of America ().

Morgan Stanley boosted its quarterly payout over the summer by nearly 11% to 77.5 cents a share from 70 cents. Bank of America in July declared a quarterly dividend of 22 cents, up by a penny, or nearly 5%.

Other contributors to U.S. dividend growth included retailers, pharmaceutical firms and technology companies. That included Microchip Technology (), which in the third quarter boosted its quarterly disbursement by 9% to 30.1 cents a share and retailer Target (), which hiked its quarterly dividend by 20% to $1.08 a share.

For the full calendar year, Janus Henderson expects dividends to grow by 8.3% to $1.56 trillion compared with 2021 levels.

Looking ahead, Matt Peron, director of research at Janus Henderson, said in a statement that “slower economic growth is likely to impact dividend payments globally.”

But in the U.S., “dividend payments tend to rise and fall far less than other parts of the world,” he added. During the early part of the pandemic in 2020, for example, U.S. companies didn’t have to cut or suspend their dividends as much as those firms in regions such as Europe.

That is because U.S. companies pay out a lower percentage of their profits through dividends and rely more on stock buybacks to return capital to shareholders than companies elsewhere in the world. Indeed, Janus Henderson, pointed out in its most recent quarterly survey that dividend coverage—that is, the relationship between earnings and dividends–“is near historic highs” and “may provide some support even if profits come under pressure in 2023.

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