US firms' dividend boom boosts Q2 payouts to $161.5B

US companies distributed $161.5 billion in dividends during the second quarter of 2024, marking an 8.6 percent increase on an underlying basis, according to the latest edition of Janus Henderson's Global Dividend Index.

According to the report released this week, distribution activity got a significant bump from Google parent Alphabet and Meta, formerly Facebook, which both initiated dividend payments for the first time this year and effectively raised the underlying US total by 3.6 percentage points.

Despite elevated interest rates, the new report noted that corporate earnings growth remained steady, with 96 percent of US companies either maintaining or increasing their dividends year-over-year during the second quarter. Among the few exceptions was 3M, which cut back its dividend for the first time in 64 years as it spun off its Solventum business.

Globally, dividend payments also saw robust growth, rising 8.2 percent to a record $606.1 billion in the second quarter. Over 90 percent of companies worldwide increased or maintained their dividends, and one-third of all sectors posted double-digit growth. Banks' eagerness to return value to shareholders contributed significantly to the worldwide expansion in payouts, accounting for one-third of the global year-over-year increase. Insurers, vehicle manufacturers, and telecom companies also played significant roles.

Jane Shoemake, client portfolio manager at Janus Henderson, highlighted the positive global trends that have unfolded in spite of higher interest rates.

“We had optimistic expectations for the second quarter and the picture was even brighter than we predicted thanks to strength in Europe, the US, Canada, and Japan,” she said in a statement. “Companies have also proved resilient and in most industries continue to invest for future growth.”

Following the strong second quarter performance, Janus Henderson upgraded its global dividend forecast for 2024. The firm now expects a record $1.74 trillion in dividend payouts globally, a 6.4 percent underlying increase from 2023.

Shoemake said moves to begin paying dividends from Alphabet and Meta, as well as China's Alibaba, were a "positive signal" indicating that they've reached an important milestone.

"These companies are following a path well-trodden by growth industries over the last couple of centuries, reaching a point of maturity where dividends are a natural route for returning surplus cash to shareholders," she said. "Paying dividends will also broaden their appeal to investors for whom dividends are a vital part of their investment strategy and it may also encourage more companies to follow suit.”