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Global dividends hit $775 billion: Will the good times continue for investors?

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Surging oil prices and a resilient financial sector sees global dividends hit a record high, but global headwinds remain.

Investors have been the big winners. A new report reveals companies choose to reward shareholders with bumper dividend payments.

Statistics by asset managers Janus Henderson show quarterly dividend for H2 was $775.9 billion, up 11.3%.

The boom in dividends is a result of companies around the world rebounding swiftly from the recession and pandemic over the last 2 years.

Such is the rebound that the US, Canada, Switzerland and Netherlands broke all-time quarterly dividend payments records.

"Despite the significant economic disruption caused by the pandemic, global dividends have surpassed pre-pandemic levels," the report says.

"The strong Q2 figures follow a profitable 2021 when companies enjoyed rising sales and expanding profit margins on the back of soaring post-pandemic demand."

What's driving the growth?

If you've been watching the market lately, it probably isn't surprising that oil and gas companies are leading the charge.

Key sector trends playing out internationally lead to a surge in cash flow for investors.

The rising cost of oil meant the producers cashed in, with two-fifths of the second quarter growth coming from these businesses.

At the same time, banks and other financials paid out strong dividends as central banks in Europe relaxed restrictions on banking on dividend payouts.

The remaining growth came from consumer discretionary stocks that are benefiting from a post-lockdown resurgence.

Resilience in the Australian market

Unsurprisingly, Australia is following everyone else.

After all, the ASX 200 is made up of banks and miners. As such, Australian miners follow the world and pay out strong dividend payments.

This is despite a weakening economic backdrop and Q2 being a traditionally slow quarter for the Aussie market.

But Janus Henderson's client portfolio manager Jane Shoemake opined the Australian market will remain resilient in a difficult economic backdrop.

"From a global perspective, there is nothing to suggest that global dividends cannot achieve the 5–6% annual growth rate that we have become accustomed to over the long-term. We continue to encourage investors to diversify their income exposure by investing globally for exposure to this dividend growth," Shoemake said.

What's next for global investors?

The report shows dividends are set to improve, albeit by a modest upgrade.

The company says it has upgraded its annual forecast and now predicts payouts to reach US$1.56 trillion (AUD$2.22 trillion), up from US$1.54 trillion (AUD$2.19 trillion) last quarter.

However, Janus Henderson's head of Australia Matt Gaden warns investors against expecting such strong future payouts.

"We would caution investors that local payouts are unlikely to maintain their post-COVID strength," he said.

"This is particularly important given the relatively high concentration of Australian dividend payers being banks and miners," Gaden added.

As such, Gaden points to the importance of sectoral and geographical diversification.

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