Dividends continue to outpace profit growth in 2022 and 2023

investmentweek.co.uk:

Throughout 2022, while profits hit record levels of 5.8% (£3.1trn), 49% higher than pre-pandemic levels, they rose much slower than dividends did.

Globally, dividends and share buybacks totalled £2.9trn throughout 2022, as dividends rose by 20.1% to £1.26trn and share buybacks jumped by a third, according to the annual Dividend Cover report from the Henderson International Income trust.

While profits hit record levels of 5.8% (£3.1trn) in 2022, 49% higher than pre-pandemic levels, they rose much slower than dividends did.

AJ Bell: 2023 'on track' to be third best year for cash returns from FTSE 100

Although the profit cover of dividends and share buybacks has declined from the highs of 2021, from 1.58x to 1.33x, profits remained high enough to boost dividends and share buybacks by 25.4% last year.

Focusing solely on dividend cover, the level reached 2.43x last year, compared to 2.76x in 2021. However, this was an exceptionally high year due to the pandemic, and 2022 was actually the second highest dividend cover level since 2014.

Looking ahead, the report predicted dividends would reach £1.3trn throughout this year, growing 5.1%. Meanwhile, profits are expected to finish slightly below 2022 levels at £3trn, leaving dividend cover at 2.31x and dividend and share buyback cover at 1.33x.

Deep Dive: UK AIM left 'vulnerable' to rate hikes but discounts remain 'attractive'

Ben Lofthouse, portfolio manager of Henderson International Income trust, said: «Despite war, an energy crisis and soaring interest rates, dividends grew in 2022 and will grow again this year.

»Asset prices have been volatile, but dividends keep delivering and they remain very well backed by company profits. International dividends have more than