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Energy Windfall Drives Shareholder Payouts to New Record | Business section

LONDON (Reuters) — Energy companies reaping record profits on the back of soaring oil and gas prices helped global dividends paid to shareholders rise above pre-pandemic levels and hit a quarterly record, data showed Wednesday.

Oil and gas companies, including state-controlled giants in Latin America, accounted for more than two-fifths of dividend payout growth in the three months to the end of June, according to the latest Global Dividend Report from the fund manager Janus Henderson.

Banks freed from pandemic-era dividend restrictions were behind a similar share of the growth in payouts, while consumer companies such as automakers also paid out more.

In total, global dividend payments reached $544.8 billion in the second quarter, Janus Henderson calculated, up 11.3% on an overall year-over-year basis after companies cut their dividends during the Covid-19 pandemic.

The payments underscore how companies have had a stellar year in 2021 as economies have rebounded, and how corporate profitability has held up this year even as households are plunged into a cost-of-living crisis as inflation soars and fears of a global recession grow.

For the year, Janus Henderson predicts global dividend payments will hit a record $1.56 trillion, a 5.8% year-over-year increase.

“What we’ve seen is that companies have generally started paying dividends again a lot faster perhaps than some commentators thought, because earnings have been better,” said Ben Lofthouse, chief revenue officer. global shares of Janus Henderson.

The jump in dividends is good news for shareholders such as pension funds, he added, especially in light of falling markets this year.

While the post-pandemic dividend rebound has been faster than expected, the outlook is not as rosy as economies slow and corporate margins are squeezed.

Emerging Markets Boom

Cash-rich oil producers, including Brazil’s Petrobras and Colombia’s Ecopetrol, fueled higher payouts to shareholders.

State-controlled Petrobras topped the list of the world’s biggest dividend payers in the quarter.

UK dividends jumped 29.3% year-on-year in the second quarter as payments from commodity producers and banks surged, while high commodity prices pushed emerging market dividends up 22.5 % to a new high. Emerging markets beat all other regions for the first time since 2015.

Although energy companies have reported skyrocketing profits, their dividend payouts have been higher during previous commodity booms, and Janus Henderson’s data does not account for money returned to shareholders through buyouts. of shares.

With major economies now heading for significant downturns, there are concerns about investors’ reliance on energy industries for dividend growth.

Dan Kemp, global chief investment officer of Morningstar’s investment management group, said dividend funds could become “increasingly reliant on what is essentially a highly cyclical industry.”

The size of recent dividend payouts could also trigger more calls for windfall taxes on oil and gas profits, although analysts say larger dividend payouts are boosting the many pension funds that hold energy stocks.

“We would argue that companies paying dividends to shareholders are preferable from an environmental sustainability perspective rather than reinvesting in new oil and gas production that contributes to further worsening global warming,” said Mike Coffin of Carbon. Tracker, a financial think tank.