Dividend payments decline due to energy company decisions

Dividend cuts in the oil and mining sectors dragged down global dividend payments in the third quarter as companies grappled with volatile commodity prices.

According to the Janus Henderson Global Dividend Index, dividends experienced a slight decline overall, falling 0.9 percent globally on a headline basis. However, according to the underlying index, which is adjusted for currency effects, payments increased by 0.3 percent.

According to the index, nine out of every 10 companies increased or maintained their payments.

However, two major global dividend cuts stood out.

Brazilian oil producer Petrobras made the world's largest dividend cut for the second consecutive quarter, paying 9.6 billion dollars less than the previous year.

Australian miner BHP reduced its payments by 6.9 billion dollars due to sharply falling profits as a result of the decline in commodity prices. BHP was the world's largest dividend payer in 2021 and 2022. Other Australian mining companies, including Rio Tinto and Fortescue Metals, also reduced their payments.

More than half of all mining companies reduced their dividends, and some moved away from "progressive" dividend policies, which they had committed to increasing every year.

Ben Lofthouse, head of global equity income at asset manager Janus Henderson, said, "Excluding commodity-related sectors such as mining and chemicals, dividend growth for companies generally remains strong across a wide range of sectors and regions. However, it is a well-understood situation by investors that commodity dividends will rise and fall with the cycle."

In the United Kingdom, underlying payments increased by 1.5 percent. Although growth was held back by significant cuts in the mining sector, Glencore was an exception. More than half of non-mining companies provided double-digit returns, driven by banks, oil companies, and utilities.

Banks, which increased their profits due to high interest rates, made the largest contribution to dividend growth in the third quarter, providing an annual increase of 5.8 billion dollars or 9.3 percent.

Jane Shoemake, client portfolio manager at Janus Henderson, said that banks were "trying to catch up after regulation and the pandemic" and that regulated, inflation-linked sectors like utilities were "not particularly growing" but were "stable players."

China's oil and gas sector pushed the country's dividends to record levels in the third quarter, despite stagnation in other sectors.

China's payments increased by 7.8 percent on an underlying basis, reaching 38.2 billion dollars. The growth was led by PetroChina, which more than doubled its annual dividend to 6.5 billion dollars. However, growth in the oil and gas sector masked weakness elsewhere, with cuts at China's largest dividend payer, China Construction Bank, and distressed real estate companies like Country Garden Holdings.

Janus Henderson's overall forecast for the year fell from 1.64 trillion dollars to 1.63 trillion dollars. The new forecast implies a 4.4 percent increase in dividends for 2022. The US, France, Canada, Switzerland, and China are on track to make record payments this year.

News Source: 12punto