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Global corporate dividends are set to reach a record high this year, as a rebound in business activity and a rise in consumer demand boosted profits for most sectors that were hit by the pandemic last year.

According to a Reuters analysis of Refinitiv data for 3,394 global companies with market capitalization of at least US$1-billion, their total payouts to shareholders are estimated to be US$1.37-trillion in 2021.

Dividends slumped last year against the backdrop of the COVID-19 pandemic and as regulatory constraints and government pressures to restrict payments weighed.

“The robust growth in dividend payouts by global companies reflects the sharp snapback in earnings post the pandemic-driven weakness. Dividend payouts are normalizing alongside economic stability and corporate confidence,” said Geoff Dailey, senior portfolio manager at BNP Paribas Asset Management.

“Capital markets are accessible and corporate balance sheets are healthy further bolstering the ability of firms to increase dividends.”

The data showed European companies’ payouts in 2021 are estimated at US$252.4-billion, a 25-per-cent rise over last year. U.S. dividends are expected to grow to US$562.3-billion, an 8.6-per-cent increase.

Mining firms led the dividend payouts, boosted by a surge in commodity prices this year, according to the data.

The financial sector is also expected to deliver higher dividends, as global central banks such as the U.S. Federal Reserve and the European Central Bank relaxed their restrictions on dividends and buybacks they imposed last year.

“Globally 90% of companies either raised their dividends or held them steady - a very strong reading,” Janus Henderson said in a report this month.

The asset manager calculated that global companies delivered a record US$403.5-billion in the third quarter, which was up 22 per cent over the same period last year.

According to the data, MSCI World index’s forward dividend yield stood at 1.72, lower than a 10-year average of 2.45.

“The question investors always have to consider is whether these prospects are correctly priced into share prices,” said Jonathan Spread, senior portfolio manager, global equities at Mondrian Investment Partners.

“With U.S. dividend yields currently well below [their] historical average, a lot is already priced in,” he added.

“We believe Japan has the best combination of future dividend growth and current yield, underpinned by the strength of the Japanese corporate balance sheets.”

Among major countries, British companies offer a forward 12-month dividend yield of 3.4 per cent, compared with Japanese firms’ 2.2 per cent and U.S. companies’ 1.3 per cent.

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