Developing Apac’s dividend payments to shrink 0.3%: S&P

DIVIDEND payments for 2023 from companies in the developing Asia-Pacific (Apac) region are estimated to shrink 0.3 per cent or US$0.8 billion to US$279 billion, said S&P Global Market Intelligence.

In its latest interim report on dividend trends released on Tuesday (Aug 8), the developing Apac region is classified as mainly comprising China, Taiwan, India, Indonesia, Thailand and Malaysia.

This comes as the financial information services provider expects dividend payment to grow at a “muted” 2.1 per cent in mainland China at US$164 billion in 2023, the slowest rate observed in the last decade. 

While China’s energy sector is expected to grow by 22 per cent, its troubled real estate sector is forecast to see a 40 per cent payment cutback, while the financial services sector is projected to face a 29 per cent decrease due to the equity market downturn. 

All developing Apac economies are forecast to see increasing dividends, except Malaysia with flat changes and Taiwan, with dividends plunging 17 per cent or US$10 billion following the “exceptionally high base” from last year boosted by the trade boom.

Developed Apac region

S&P also expects the developed Apac region – comprising Singapore, Australia, Hong Kong, Japan, and South Korea – to now report an estimated US$352 billion in dividend payments, down 2.2 per cent from the previous year’s payouts of US$360 billion. It is also lower than the company’s earlier estimates of US$371 billion for 2023. 

Weakening external demand and investment as well as a faltering post-pandemic recovery contributed to the forecast shrinkage of dividend payments in the developed Apac region.

Hong Kong, the largest dividend distributor in the developed Apac region, is expected to see a cutback by US$8.2 billion or 6.2 per cent year on year, pulling developed Apac’s dividends down alongside Australia and South Korea.

Singapore and Japan saw improved forecasts, with Japan increasing US$4.8 billion or 4.3 per cent year on year and Singapore seeing a rise of US$1.3 billion or 8 per cent year on year. 

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However, S&P expects developed Apac dividends to rebound by 4 per cent year on year to US$367 billion in 2024, driven by recoveries in Hong Kong and South Korea.

Banks, industrial goods and services as well as telecommunications form the top three sectors in the developed Apac region contributing to dividend payments in the next two years. 

The forecast for the overall Apac region mirrors that of this year’s global dividend payments, which face mounting downward pressure due to soft demand, weak business confidence and high interest rates. 

Global dividend payments are forecast to come in flat at US$2.1 trillion for 2023, representing the slowest growth rate observed in the past decade, following a 7 per cent contraction in 2020 when the pandemic hit. 

North, Latin America regions

In the North America region, US dividends are expected to end the year with a 2.7 per cent increase after rising 5.2 per cent in the first half of the year. Canadian dividends are projected to grow 3.8 per cent to US$68.7 billion. 

The US market accounts for 34 per cent of global aggregated dividend payouts. 

Over in Latin America, dividends are projected to plunge 42 per cent. 

The forecast drop comes as payouts from national energy company Petrobras, which dominates Brazil’s aggregated dividends, are expected to plummet 60 per cent this year. Petrobras’ board intends to relook its dividend policy, which could affect payouts for the second half of the year. 

Europe

Over in Europe, dividend payments are projected to rise 5 per cent to US$497 billion, bolstered by last year’s bumper profits.

S&P anticipates that European companies will continue to see growing dividend payments for the rest of the year, despite higher interest rates and persistent inflation. 

The growth is projected to be bolstered by Germany, with a 24 per cent or US$14.2 billion increase in dividend payments lifted by Volkswagen’s special dividend at the beginning of the year as well as France, with a 10 per cent or US$7.1 billion increase. 

Although the UK is forecast to see a decrease of 5 per cent or US$6.1 billion, it remains the largest dividend payer with an estimated distribution of US$117 billion this year. 

In 2024, S&P is forecasting dividends in the UK to return to growth, France to maintain its steady increase, and Germany to fall 9 per cent following its significant rise this year. 

Banks, healthcare as well as industrial goods and services form the top three sectors in the European region contributing to dividend payments. 

The report forecast that dividend payments in the banking sector will sustain its strong pace with increases of 8.5 per cent in 2023 and 6 per cent in 2024, after a 12 per cent rise in 2022. 

The energy sector is projected to face a drop in payments to US$306 billion, down 6 per cent from the previous year as a result of lower oil and gas prices as well as weaker demand. 

The automobile sector is expected to see spiking dividend payments of 51 per cent to US$68.9 billion this year, boosted by special dividend payments as its profitability improved promptly with dividends surpassing pre-pandemic levels by 2022.