U.S. companies paid out a record $574.2 billion in dividends to shareholders last year, according to the Janus Henderson Global Dividend Index. This windfall for investors tapered as the year went on, with a further decline expected this year, as interest rates are projected to rise.
Dividends rose 8.4% globally in 2022, and the U.S. was one of 12 countries posting record 2022 dividend growth.
U.S. dividends grew a hefty 7.6% in 2022, with 94% of companies raising or maintaining dividend payments. But the strong pace of payouts started to fade as the year went on. First-quarter dividends grew an impressive 10.4%, then sharply dropped to 5.5% growth by the fourth quarter.
Investors may be scrambling for yield in 2023 because dividend growth is expected to fade. Janus Henderson projects global dividend growth of only 2.3% this year.
Oil, Financial Stocks Reward Investors
About two-thirds of the 2022 growth came from oil and financial stocks.
Oil giants were flush with cash as energy prices peaked to over $100 barrel in March and June, as Russia's war against Ukraine pushed up oil, natural gas and gasoline prices. Some companies raised their dividends or doled out special dividends with their surplus cash.
Exxon Mobil and Chevron both have dividend yields of more than 3% annualized.
In financials, global asset manager Blackstone yielded over 6%, while Morgan Stanley yielded over 3%. Wells Fargo and JPMorgan Chase were other high yielders.
Telecommunications stocks lagged, with AT&T slashing its dividend by 47% in February 2022. The cut came after the company sold WarnerMedia and experienced tighter cash flow. The decision prompted it to be removed from the exclusive S&P Dividend Aristocrat index.
Higher Interest Rates Squash Out Dividend Boosts
"Corporate balance sheets in the U.S. remain healthy, which is important for future dividend growth. However, given earnings growth expectations are quite muted, and perhaps still too optimistic due to the expected impact of tighter policy, we are cautious in our outlook for U.S. dividend growth in 2023," said Matt Peron, director of research at Janus Henderson.
Dividends may get squeezed in 2023, as companies look for ways to preserve cash amid a rising-interest-rate environment, the firm added.
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