Exploration and production companies were among the leading firms that drove the fastest growth in dividend payments during the first quarter, according to the latest tally from Janus Henderson Group plc.
The active asset manager’s Global Dividend Index showed that dividend payments in the United States rose 10.4% on an underlying basis to a record of $141.6 billion during the first three months of this year. Underlying growth adjusts for the distortion that may be caused by one-off special dividends, changing exchange rates and other events.
Nearly every U.S. company in the Janus index (99%) increased payments or held them steady, as dividends continued to be a reliable source of income growth for shareholders.
“As the U.S. corporate earnings picture improved, companies rewarded shareholders with higher dividend payments to start 2022,” Janus director of research Matt Peron said.
Chesapeake Energy Corp., ConocoPhillips, Coterra Energy Inc., Devon Energy Corp., and ExxonMobil are among a large group of oil and gas producers that used most of their free cash flow generated during the first quarter for dividends and share buybacks.
“For the first time in a decade, we are seeing support for oil and natural gas prices that is driven by the long-term fundamental supply and demand outlook,” Coterra CEO Thomas Jorden said during the company’s 1Q2022 earnings call. But, “investors have been clear. They want us to be disciplined in both high and low commodity price environments and be proactive in returning cash to our shareholders.”
Devon COO Clay Gaspar said of its long-term plans: “Certainly, commodity prices help, but we’re not just relying on a higher commodity price to add to the quantity and the quality of this portfolio.”
Globally, 1Q2022 dividends jumped by 11% on a headline basis to a total of $302.5 billion, a record for the “seasonally quieter” first quarter, according to the London-based firm. Even stronger at 16.1% was underlying growth. Dividends have more than doubled since 2009, when the Index launched, the asset manager said.
Over the last five years, the world’s five most important dividend-paying sectors have been banks, oil and gas producers, pharmaceuticals, telecoms and insurance companies, index data showed. Oil and gas producers were seventh over the entire five years, but last year they rose to No. 3.
“Both oil and metal prices have been propelled higher following the Russian invasion of Ukraine, helping to sustain dividend growth in these sectors for the time being,” said Peron.
Australian conglomerate BHP Group Ltd. is set to be the world’s largest dividend payer in 2022 for the second year in a row, Janus projected. BHP’s board said last week it would reward its shareholders with Woodside Petroleum Ltd. shares in connection with their recently approved merger. The dividend is scheduled to be paid on June 1.
The global growth tracked in the index is in part because of the ongoing normalization of dividend payments following the disruption caused by the pandemic, according to the firm. There were significant dividend cuts in 1Q2021, and it provided a relatively low base for comparison purposes.
“However, the 1Q2022 growth also reflects the robust post-pandemic economic rebound that took place in much of the world in 2021 and into early this year,” Peron said.
Globally, 81% of companies that issued payouts in the first quarter increased their dividends year/year, while 13% held them steady. Meanwhile, every sector posted year/year increases.
Janus is maintaining its expectations for the remainder of the year given the uncertain global economic outlook and rising geopolitical risks. Nevertheless, the inclusion of the 1Q2022 figures increased the forecast slightly for the year. For 2022, Janus now expects global dividends to reach $1.54 trillion, a headline increase of 4.6%. This is equivalent to a 7.1% increase on an underlying basis.
“With rising inflation and interest rates expected to put pressure on economic growth globally, greater uncertainty is clouding the outlook for corporate profits in the second half of the year,” Peron said. “However, it’s important to keep in mind that dividend payments are much less volatile than earnings.”
At the end of March, Janus had about $361 billion in assets under management.
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