Global Dividends Reach Fresh High In 'exceptionally Volatile' Markets

Global dividends rose 7.7% on a headline basis, the fastest rate of growth since 2014, and reached a total of $1.252trn, the annual edition of the JHGDI revealed.

The index itself rose to a record 171.2, meaning dividends have risen by almost three quarters since 2009.

Meanwhile, every region of the world and almost every industry saw an increase with records being broken in 11 of the index's 41 countries, including the US, Japan, Switzerland, Hong Kong, Taiwan, and the Netherlands.

Underlying growth, which the report said adjusts for movements in exchange rates, one-off special dividends and other factors, was 6.8%, showing less divergence than in previous years across the different regions of the world. 

The US has been the key driver of global dividend growth in recent years and after a slow 2016, growth picked up in 2017, reaching 5.9% on a headline basis, and 6.3% at the unde­­rlying level. US companies paid shareholders a record $438.1bn. 

But it was a record year for Asia Pacific ex Japan where total dividends paid jumped 18.8% to $139.9bn, boosted by large special dividends in Hong Kong. Hong Kong, Taiwan, and South Korea all individually broke annual records too.

Underlying growth for the region was 8.6%, led by Taiwan and South Korea which both saw double-digit increases, while Australia saw strong underlying growth of 9.7%.

Japan also saw record-breaking growth of 11.8% on an underlying basis while every one of its sectors, and most companies, showed growth in yen terms. Dividends in emerging markets also grew strongly, though remain a long way below their 2013 peak. 

'Disappointing' Europe

Europe was somewhat disappointing with underlying growth of only 2.7% and just a 1.9% increase in headline terms for dividend payouts. The report said a combination of cuts from a handful of large companies in France and Spain during Q4, a weak euro during the the second quarter when most European dividends are paid, and lower special dividends were to blame.

France barely grew at all in underlying terms, after a stellar 2016 while Germany rebounded in 2017, and numbered among the fastest-growing nations alongside Austria, Portugal, Belgium, the Netherlands, and Switzerland. 

In the UK, headline growth was stumped by a weak sterling, though underlying growth was 10% as UK-listed multinational mining companies restored dividends that had been previously been cut or cancelled.

Looking ahead, Janus Henderson expects underlying growth of 6.8% for 2018, with expansion continuing from every region of the world.

It added: "If the dollar maintains its lower level against other currencies, the 2018 total should benefit from payments translating to dollars at more favourable exchange rates.

"That will help push headline growth to 7.7% again, yielding a new record total of $1.34trn."

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Ben Lofthouse (pictured), director of global equity income at Janus Henderson, said: "While equity markets have been volatile recently, dividend payments are reflective of corporate health and economic conditions, and we expect them to be much more stable. 2017 was a great year for income investors with dividend growth broadly spread across countries and industries.

"All three of the largest economies in the world, the US, the EU, and China, are now expanding at the same time. As a result, companies are seeing rising profits, and healthy cash flows, and that's enabling them to fund generous dividends.

"The record payout last year was almost three-quarters higher than in 2009, and there is more to come. The next few months are set fair, and we expect global dividends to break new records in 2018."

Methodology

The Janus Henderson Global Dividend Index analyses dividends paid by the 1,200 largest firms by market cap as at 31 December, before the start of each year.

Dividends are included in the model on the date they are paid and are calculated gross, using the share count prevailing on the pay-date and converted to USD using the prevailing exchange rate.

Where a scrip dividend is offered, investors are assumed to opt 100% for cash. This will slightly overstate the cash paid out, but JHGDI believes this is the most proactive approach to treat scrip dividends.

The model takes no account of free floats since it is aiming to capture the dividend paying capacity of the world's largest listed companies, without regard for their shareholder base. 

All raw data was provided by Exchange Data International with analysis conducted by Janus Henderson Investors.