Dividends in Australia see severe Q2 decline
Australia saw one of the most severe underlying dividend declines in the world in the second quarter of 2024, according to Janus Henderson.
In the firm’s Global Dividend Index, the asset manager said underlying dividends fell by 24.3 per cent during the quarter to 30 June.
Australian underlying dividends fell from US$8.8 billion ($13.3 billion) a year ago to US$6.6 billion in the second quarter, the firm said.
This led overall Asia-Pacific dividends to be flat during the quarter at US$38.9 billion as well as a lack of dividend in Hong Kong, down from US$40.7 billion a year ago.
The large decline in Australia was attributed to a “very large reduction” from Woodside Energy where profits fell due to lower commodity prices, inflationary pressure and asset impairments. This was in contrast to the firm having been the largest payer at the same time a year ago.
However, Janus Henderson admitted that the Q2 is less important in Australia than other countries and would have minimal effect on full-year results.
Looking ahead into the three months to 30 September, Janus said it does not expect strong growth but that the third quarter should be more resilient than the second.
When looking at dividends globally, Janus said global dividends rose 8.2 per cent on an underlying basis to US$606 billion, with 92 per cent of companies raising dividends or holding them steady.
In particular, banks drove one-third of the year-on-year increase in underlying dividend growth as well as contributions from insurers, vehicle manufacturers and telcos.
The asset manager increased its 2024 global forecast to US$1.74 trillion, up 6.4 per cent on an underlying basis.
Jane Shoemake, client portfolio manager on the global equity income team at Janus Henderson, said: “Around the world, economies have generally borne the burden of higher interest rates well. Inflation has slowed while economic growth has been better-than-expected. Companies have also proved resilient and in most industries continue to invest for future growth. This benign backdrop has been especially positive for the banking sector, which is enjoying strong margins and limited credit impairments, which has bolstered profits and generated a lot of cash for dividends.”
Part of the increase in expected forecasts can be attributed to the initiation of dividends from US technology companies Meta and Alphabet and China’s Alibaba which Janus attributed to the firms “reaching maturity”.
“These companies are following a path well-trodden by growth industries over the last couple of centuries, reaching a point of maturity where dividends are a natural route for returning surplus cash to shareholders. In so doing they have confounded sceptics who said this group of companies was different. The stock market simply evolves over time as industries rise and fall as they meet the changing needs of society.
“Paying dividends will also broaden their appeal to investors for whom dividends are a vital part of their investment strategy and it may also encourage more companies to follow suit.”
AUTHOR
Laura Dew
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