Global dividends are expected to exceed pre-pandemic levels in 2022 as profits recover, according to research from Janus Henderson.
The report by the Henderson International Income Trust showed that global profits were expected to reach £2.2trn this year, due in large part to a 14% increase in North America, Emerging Markets and Asia Pacific ex Japan. This would represent a new record for global firms.
As well as higher pay outs, dividends would also be safer, with cover of 2.4 times in 2022 – the highest margin since 2013.
The only damp squib is the UK, where dividend cover is expected to recover to 1.1x, below the global average but still an improvement on last year. Despite the improvement, share prices of some high-yielding UK companies have not risen to reflect this.
Ben Lofthouse, fund manager of Henderson International Income Trust said that “dividends are a good indicator” of a business’s performance, something that is not always reflected in share value.
Companies paying high dividends could become increasingly appealing to investors looking for consistent returns, especially as UK inflation reached a 30-year high of 5.4% in December 2021.
Lofthouse said: “Dividends fulfil a critical role as a bear-market protector in bad times, and a return enhancer when markets are stagnant at times of high valuations – like today.”
Many analysts, such as Guy Foster, chief strategist at Brewin Dolphin, predict inflation will continue to escalate for most of the year, making high dividends an ever more stable option for investors.
Lofthouse also described the rising cultural shift towards dividend pay-outs in Asia, which have historically remained low, as “a welcome trend.”
However, dividend cover in the market declined as Covid and government intervention disrupted the economy and trusts such as Aberdeen Asian Income ate into their revenue reserves to support pay outs to shareholders.