Global companies made dividend payouts of $497.4bn to investors during the second quarter of the year as payments rose in almost every region of the world, according to the latest edition of the Janus Henderson Global Dividend Index.
Figures for the second quarter represented a 12.9 per cent year-on-year headline increase in dividends, although foreign exchange effects did exaggerate performance, with the US dollar weaker against most currencies during Q2.
Regardless, growth in underlying dividends – excluding special dividends – rose by 9.5 per cent year-on-year, the fastest rate seen for three years.
The Janus Henderson Global Dividend Index measures the progress global firms have made in paying their investors an income. The index uses 2009 as a base year, starting at 100 points.
According to the asset manager, the index ended the quarter at a record 182.0 points, representing a rise of more than four-fifths since 2009.
Source: Janus Henderson
The surge in global dividends was fuelled largely by an increase in payouts from Europe ex UK companies, with two-thirds of the region’s dividends paid during this period.
European dividends increased by 18.7 per cent year-on-year – on a headline level – reaching a record $176.5bn, with growth spread across countries and sectors and strong corporate earnings from 2017 feeding into payouts.
On an underlying basis, dividends grew by 7.5 per cent year-on-year, with France, Germany, Switzerland, the Netherlands, Belgium, Denmark and Ireland all setting new records.
However, there were several high-profile companies cutting dividends during the second quarter including banks Deutsche Bank and Credit Suisse and energy provider EDF.
Elsewhere, the US recorded a 4.5 per cent rise in headline dividends rising to $117.1bn after lower special dividends. Underlying growth was stronger at 7.8 per cent, the fastest expansion for two years.
Only one company of the 50 US companies in the Janus Henderson Global Dividend Index shrank its payout – GE, whose cut reduced the US dividend growth rate by one-tenth.
Japanese companies saw strong double-digit headline growth of 14.2 per cent – and 12.3 per cent on an underlying basis – reaching $35.9bn and a record for Japanese payouts.
In the Asia Pacific ex Japan region, there was strong headline growth boosted by a number of large special dividend payments in Hong Kong and Singapore, as dividends grew by 29.2 per cent to $42.8bn.
The UK stood out for its weaker Q2 performance after distributing $32.1bn, a 1.4 per cent decline year-on-year in headline terms as a result of lower special dividends and timing factors.
However, in underlying terms, growth in the UK was ahead of the global average with 13.1 per cent growth, thanks to London-listed mining groups that rapidly raised dividends on the back of improving profits.
Source: Janus Henderson
Finally, emerging markets also witnessed strong headline growth – rising by 11.5 per cent to $26.8bn – and underlying growth of 16.1 per cent with Indonesia and China standing out in particular.
The financials sector was the most important during the second quarter, representing a quarter of all dividends paid and growing by 9.6 per cent in underlying terms.
As noted above, miners have increased dividends – rising by 20.7 per cent on an underlying basis – after a period of restructuring and increased profits.
Additionally, the technology, energy and consumer cyclicals sectors all recorded year-on-year double-digit growth in Q2.
The top 10 dividend payers of the most recent quarter– led by consumer giant Nestle – represented 9 per cent of total dividends and paid out $46.5bn to investors up from $42.3bn last year.
As a result of the strong Q2 showing, the asset manager has upgraded its forecast for underlying dividend growth for 2018 from 6 per cent to 7.4 per cent.
While the forecast for underlying growth has increased, the stronger US dollar could depress the translated value of global dividends with estimates of around $1.4trn for the full-year.
Ben Lofthouse, head of global equity income at Janus Henderson (pictured), said: “The second quarter exceeded our expectations in every region of the globe, and income investors will be cheering record payouts and strong growth, with the potential for more to come.
“Even in out-of-favour regions, such as Europe, dividends continue to increase, driven by ongoing economic and earnings growth.”
Performance of index since launch
Source: Janus Henderson
However, there remain a number of outliers that could detract from corporate earnings in the latter half of the year, including significant geopolitical challenges for markets.
Lofthouse explained: “Looking further ahead, the impact on global trade of escalating tariff battles with the US could have a negative impact on corporate profitability, though its magnitude is highly uncertain at present.
“Nevertheless, we are still optimistic that in aggregate corporate earnings can continue to grow next year, and payout ratios in key parts of the world like Japan have scope to rise further too.”
He added: “Dividends in any case are less volatile than profits, and we are confident that 2019 will see the global total continue to rise in underlying terms.
“The trajectory of the dollar may affect the headline growth rate next year, but exchange-rate fluctuations have little impact over the longer term.”