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BLOG — Jan 20, 2025
What to expect for dividends in 2025
By Stella Lim
The following blog post contains excerpts of a presentation shared during our recent webinar, ‘The Big Picture: Charting the Course for Capital Markets in 2025’. Access the on-demand replay of the webinar(opens in a new tab) and download our Big Picture outlook report(opens in a new tab) for further insights on interest rates, the IPO market, dividends, and other key factors shaping the capital markets in 2025.
Dividends signal the capital allocation decisions of companies made in a very comprehensive consideration of their financial conditions, future growth plan, operating environment, peer competition, etc. In this sense, dividends really serve as a check on [a company’s] fundamentals and a forward-looking indicator of [their] performance, making them helpful in picturing what to expect in the equity markets.
Decelerating growth [is what] we we’ve seen in global dividends since the recovery from COVID, until last year when the growth rate accelerated to 8%. About $180 billion more was paid to shareholders than in 2024. This was a surprise given the ongoing geopolitical and economic uncertainties.
There were record-high initiations in the U.S. TMT sector, banks in Italy and Spain, the automobile sector in Japan, and general payout growth from Mainland China. Even oil and gas sector dividends remain solid against this very highly volatile price movement. The question now is whether this new high could be sustained in 2025. And the answer, based on our latest analysis, is yes. We see global aggregate dividends staying at $2.3 trillion in 2025.
Taking you to regional level, the payout from North America will increase by 4%. In developed Asia – Japan, Hong Kong, Australia, South Korea, and Singapore – the payout will increase by 3%. In Europe, we are seeing a contraction of 3.4%.
Emerging market dynamics at a high level is a contraction, but we see a varying trend. Developing Asia, led by Mainland China, India and Taiwan, will keep a solid 5% increase. In developing Europe, Middle East and Africa – predominantly Saudi Arabian dividends – we see the sharpest decline of all the geographical regions, down 20% because Saudi Aramco's special dividend distribution plan came to an end as of Q4 2024. Latin America will see a moderate drop of 4%.
At a regional level, we are seeing some positivity though at a softer tone. You see a rather contained movements of single digits among the key markets this year.
This heat map shows a sector breakdown by each market. The data computed here is a year-over-year change in payments to be received in 2025 and is inclusive of all types of dividends. That means including the recurring ones and one-off special and variable dividends. (We removed some markets with smaller payout size.)
Banks and energy are, traditionally, the two top-paying sectors. Payout size globally is about $380 billion for banks and around $320 billion for energy. We are seeing global bank payout slow down to about 2% after 20% of growth [over the] past 4 years. If you look at the second column of the heat map, you can see that banks and the major markets are all only inching up the payout. (The U.K. being down is an exception due to HSBC.) Hong Kong and Mainland China, which used to have double-digit growth, [are] slowing down to 3%. Banks are generally taking a very conservative approach when it comes to shareholder return. This coincides with [the] expectation of interest rate moves.
There’s not a clear-cut answer [of] how exactly interest rate [changes] will affect the performance of individual banks. What is certain is that all these 500 banks need to realign their business strategies to this evolving environment. Based on how nimble their responses are, we will see a divide between winners and laggards.
Energy has a pretty high proportion of one-off or special variable dividends that are paid on top of the regular dividends. The industry outlook is that the slowing economic growth [and] ongoing geopolitical tension will continue to impact the sector and growing production against slowing demand is posing an oversupply risk. This negative sentiment is accrued by our analysis in the dividend stream.
In the energy column, we are seeing a single-digit move by big players such as the U.S. and U.K. – up 6%. Mainland China [is looking at] a 5% decline and Saudi Aramco, because of the unlikely continuation of special dividends from Aramco, is down 31%. The exposure to the different upstream, midstream, and downstream [of the industry value chain] affects their payouts as well. Markets like Japan and South Korea, where their proportion to downstream business is much heavier, are more exposed to price volatility.
We see [energy companies] cutting their dividend in the new year. Energy sector payouts are concentrated by a very small number of large payers. Company-specific issues like buybacks play an important role [in our analysis]. Overall, it’s clear that the variable/special dividend will be reduced, and regular dividend growth will slow down.
To summarise the global dividend dynamics, 2025 is all about cautiously sustained new high [payouts].
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