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Friday, December 3, 2021

Global companies aim to deliver record dividends this year

Global corporate dividends are set to hit an all-time high this year as recovery in business activity and rising consumer demand boosted profits for most sectors hit by the pandemic last year.

According to Reuters analysis of Refinitiv data for 3,394 global companies with a market capitalization of at least $ 1 billion, their total distributions to shareholders are estimated at $ 1.37 trillion in 2021.

Dividends plummeted last year amid the COVID-19 pandemic, as well as regulatory restrictions and government pressure to cap payments.

“The robust rise in dividend payments by global companies reflects a sharp jump in profits following the weakness caused by the pandemic. Dividend payouts are normalizing along with economic stability and corporate confidence, ”said Jeffrey Daly, senior portfolio manager at BNP Paribas Asset Management.

“Capital markets are available and corporate balance sheets are healthy, further strengthening the ability of companies to increase dividends.”

The data showed that payments from European companies in 2021 are estimated at $ 252.4 billion, up 25 percent from last year. US dividends are expected to rise to $ 562.3 billion, or 8.6 percent.

Mining companies have taken the lead in dividend payments, boosted by rising commodity prices this year, according to reports.

The financial sector is also expected to pay higher dividends as global central banks like the Federal Reserve and the European Central Bank eased their dividend and buyback restrictions imposed last year.

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“Globally, 90% of companies have either increased their dividends or have kept them at the same level – a very good indicator,” Janus Henderson said in a report this month.

The asset manager calculated that global companies brought in a record $ 403.5 billion in the third quarter, up 22 percent from the same period last year.

According to the data, the forward dividend yield of the MSCI World Index was 1.72, below the 10-year average of 2.45.

“Investors should always consider whether these prospects are reflected correctly in stock prices,” said Jonathan Spread, senior portfolio manager for global equities at Mondrian Investment Partners.

“Since US dividend yields are currently well below (their) historical averages, many of them have already been priced in,” he added.

“We believe Japan has the best combination of future dividend growth and current yields, underpinned by the strength of Japanese corporate balance sheets.”

Among the large economies, UK companies are offering a forward 12-month dividend yield of 3.4 percent, compared to 2.2 percent for Japanese companies and 1.3 percent for US companies.

Authors: Pattuja Murugabupatiya and Gaurav Dogra

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