• After a challenging stretch last year, dividend distributions rebounded in Q4 2023, driven by North America, Japan and emerging markets (but not China).
  • In the face of potential headwinds in 2024, US companies and the energy and financials sectors globally could provide a buffer for dividend growth.
  • Dividends continue to play an important role in equity portfolios with respect to income, enhancing total returns and style bias.

1. Dividend distributions bounced back in Q4 2023

Global dividend distributions struggled to compensate for elevated inflationary pressures in 2023. However, the five-year path for dividend growth paints a more positive picture, boosted by a rebound in payouts at the end of the year. Over this longer-term timeframe, which spans major geopolitical and macroeconomic challenges including a pandemic, war and rising rates, global dividends demonstrated their value as a resilient real income preserver. 

Global payouts grew by an annualised 7% from 2019 to 2023 – outpacing global inflation1 by around 2%. In Q4 2023, dividend distributions globally rose 7.6% year on year to a total of $366 billion, reversing the 2.6% year-on-year contraction in the previous quarter and ending the slowdown in growth seen since 2022. Full-year payouts finished 2023 at $1.9 trillion, up 3.5% for the year. 

Global dividend distributions by calendar month, rolling 12-month sum

Past performance is not a reliable indicator of future returns.

Source: FactSet, Vanguard. Data as of 29 December 2023 and based on MSCI All Country World Index (ACWI) constituents.

2. North America, Japan and (most) emerging markets drove growth

North America and energy-led emerging markets (excluding China) were the main drivers behind global payout growth in Q4 2023, as dividends rose by $26 billion (up 8% year on year). In the US, the main sectors driving growth included IT, energy, healthcare and consumer staples. Within emerging markets, energy stocks were the primary contributors to dividend growth. 

In contrast, China’s payouts contracted by $3 billion (-16% year on year) in Q4 2023. A confluence of challenges led to China’s woes, with the drop in payouts attributable in large part to the industrials and consumer staples sectors. 

Japan’s semi-annual payouts featured more prominently in Q4 2023. Masked by the yen’s 7% devaluation versus the US dollar during the period, strong financial results and inflationary pressures boosted Japan’s payouts to $40 billion (up 6.4% year on year). Japan’s bellwether stocks in the consumer discretionary, industrials and financials sectors rewarded investors with payout increases. 

3. There could be headwinds – but it’s not all doom and gloom

Headwinds loom for 2024 payouts, particularly for emerging markets and cyclically sensitive industries globally. In China, weaknesses in the financial and real estate sectors risk undermining confidence and payout expectations in basic materials and industrials, which are heavily reliant on global trade. 

Adding to the challenges are geopolitical tensions in the Middle East and economic disruptions arising from the conflict in the Red Sea, which could trigger renewed inflationary pressures and wider recession fears, notably in Europe. 

On the positive side, the strength of US company payouts, as well as those from the energy and financials sectors globally, could once again be key to countering any headwinds. In both the US and emerging markets, companies have, on average, higher dividend coverage than their counterparts in Europe and the UK2, which we believe could provide a buffer in the face of challenges this year. There is also the possibility that maturing technology companies in the US could begin paying dividends, following the example recently set by Meta. 

4. Dividends continue to play an important role in portfolios

As portfolio constructors consider the impact of dividend dynamics on client portfolios in 2024, here are a few key roles that diversified dividends can play in portfolios.

Long-term total returns. Price had been the overwhelming contributor to equities’ total return during the years of exceptional monetary stimulus, until fears of stagflation (i.e. high inflation and slowing growth) cut short the positive sentiment. But when expectations anchor around dividends rather than price, equity exposures that give access to diversified dividends can work as a cushion in portfolios, which we have seen since 2022. 

Moreover, reinvested dividends are a powerful driver of compounded total returns over time. Dividend distributions also diversify and grow the income of portfolios, compensating for inflation in the longer term. As the chart below illustrates, the long-term impact of compounded dividends plays an important role in total returns.

Total return contributions (local currency) for the global equity market 

the chart shows total return from September 1995 to December 2023, showing how much of that total return is attributable to price returns and how much is attributable to dividend returns.

Past performance is not a reliable indicator of future returns.

Source: FactSet, Vanguard. Data from 29 September 1995 to 29 December 2023. Global equity market = MSCI All Country World Index (ACWI). Calculations based on gross total return and price return in local currency for the longest history available.

Balanced income. For income-seeking investors, dividends are a popular approach. However, we see variation across regions in terms of when dividend distributions take place; in addition, the amount of the dividend payouts can be uneven. For example, most European and UK companies pay dividends on an annual or semiannual basis, whereas US companies usually pay dividends quarterly. Broad global equity exposure can allow investors to capture dividends more evenly throughout the year. 

Style bias. Exposures with a meaningful dividend component tend to display a bias towards the value factor, and thus can allow investors to diversify their core beta or growth-led portfolios. As growth stocks such as the so-called “Magnificent Seven”3 continue to dominate broad-based core equity indices, a value-oriented exposure or pure dividend exposure can help investors to alleviate some of the concentration risk through a potentially more defensive investment profile.


Global inflation as measured by OECD Total Consumer Price Index. The period under consideration is 1 January 2019 to 29 December 2023. 

Source: FactSet, Vanguard. Data as of 29 December 2023 and based on MSCI All Country World Index (ACWI) constituents. Dividend cover is not weighted by market cap.

3 The “Magnificent Seven” refers to a group of US stocks, namely Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA and Tesla.

Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Past performance is not a reliable indicator of future results.

Some funds invest in emerging markets which can be more volatile than more established markets. As a result the value of your investment may rise or fall.

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