Portfolio Manager: Stock Market Dividends Will Continue to Grow in 2023

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According to a leading specialist income fund manager, the stock market dividends seen over the past few years will remain strong in 2023. However, the growth rate seen during this time is likely to moderate.

This prediction comes as stock markets worldwide have experienced record highs over the past several months, a trend that could soon reach its peak and start to plateau.

Daniel Pennell, portfolio manager at Plato Investment Management, says, “After 2020’s pandemic-driven income cuts, global investors have seen strong growth in dividends across 2021 (+12.8% in AUD), again in 2022 (+15.8% in AUD), and we expect this trend to moderate in 2023 as interest rate rises bite. However, we believe global shares will continue to provide Australian investors a great source of diversified income.”

“In Q4, we continued to see some large companies, for example, Microsoft Corp (NASDAQ: MSFT), Johnson & Johnson (NYSE: JNJ), and Proctor & Gamble (NYSE: PG) increase their dollar payouts. In addition, businesses like Volkswagen AG (ETR: VOW3) have recently paid out further special dividends.”

Experts attribute this predicted moderation in dividend growth rates to rising economic and political uncertainty nationally and internationally. Businesses need the confidence to continue investing and spending money, which has to be improved due to ongoing trade wars between countries and other geopolitical tensions. As a result, business owners are likely only to pay out money in terms of dividends once their economies become more stable.

Pennell says, “In the current messy global macro environment, it’s important investors are selective when it comes to dividends and pay attention to the risk of dividend traps.”

Plato Investment Management recently released data from its proprietary dividend cut modeling, which showed an 11.2% chance of dividend cuts in global developed markets in 2023.

Pennell believes that as long as economic and political conditions remain stable, dividends should continue to rise at a moderate rate. He also believes that investors must consider the risks associated with any particular asset and adjust their portfolios accordingly.

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