Global dividend boom: what’s next for investors in 2024?

It’s certainly been a good year for many income investors with record dividends paid out in the first quarter. A stronger global economy, better-than-expected profits and the prospect of interest rate cuts have been the main drivers.

But what can we expect from companies in the second half of 2024? Here we take a look at analysts’ predictions and how you can get exposure to the potential winners.

Please remember that the value of investments will fluctuate and returns may be less than the amount originally invested. Tax treatment depends on your individual circumstances and tax rules can change. Chelsea does not offer advice and so if you are unsure of anything please contact an expert adviser.

What has happened in the UK?

Let’s start off close to home. UK dividends rose to £15.6bn in the first three months of the year, which was up 4.9% on a headline basis, according to the latest UK Dividend Monitor*. However, this included some one-off payments. When they’re stripped out the underlying figure is less impressive at just 2%*.

Airlines, leisure and travel were among the bright spots during this period, with payouts continuing to recover from the devastating Covid-19 pandemic. The top payers in the first quarter – AstraZeneca, Shell, British American Tobacco, Vodafone Group and BP – accounted for a combined £7.5bn, which was 48% of total dividends paid*.

What has happened globally?

Dividends hit a first quarter record of $339.2bn, which was up an impressive 6.8% on an underlying basis, according to the latest Janus Henderson Global Dividend Index**. It discovered that 93% of companies either increased payouts or held them steady during the first three months of this year**.

This period also saw the first ever payments made by Meta Platforms – the company behind Facebook – and Alibaba, the Chinese multinational technology company. Janus Henderson noted that banks accounted for a quarter of global growth, while transport fell significantly, due mainly to a large cut from Moller Maersk, the Danish shipping company**.

Biggest winners

The 10 biggest global dividend payers in the first quarter contained a broad mix of sectors, including companies within healthcare, technology and retail**.

1. Novartis AG
2. Roche Holding
3. Costco Wholesale Corp
4. Microsoft Corporation
5. BHP Group Limited

What is the dividend outlook?

The good news for income investors is that, despite the recent stock market turbulence, companies are expected to continuing paying dividends in 2024. Janus Henderson’s report believes the broad picture is one of “continued resilience”, especially in Europe, the US and Canada.

“We continue to expect companies to distribute a record $1.72 trn to their shareholders this year, a headline increase of 3.9% year-on-year equivalent to a rise of 5.0% on an underlying basis,” it stated.

As far as the UK is concerned, the outlook is healthy but unexciting, with almost every sector delivering flat or slowly growing payouts. “Cost pressures have eased for many businesses, but the cost of capital has risen sharply and economic growth in the UK and around the world is sluggish at best,” according to the UK Dividend Report.

Such an economic backdrop will continue to have an impact. “This all makes it difficult for companies to build earnings momentum and in turn that influences how much boards decide to pay out to shareholders in dividends and share buybacks,” it added.

What funds are worth considering?

So, what funds are worth considering for investors wanting exposure to the (hopefully) rising dividend outlook across the world?

JPM Global Equity Income

This is a core equity income portfolio that invests across the globe – and even in the emerging markets. This means you will get access to plenty of potential dividend payers. The three strong management team of Helge Skibeli, Sam Witherow and Michael Rossi, along with their analyst team, filter down this huge market into a portfolio of 40 to 90 stocks. We like the experience of the team, while their focus on risk and the growth of payouts should hopefully give investors access to a growing income stream.

IFSL Marlborough Multi Cap Income

For investors wanting exposure to UK equity income this fund also ventures into the small-cap space, which many portfolios avoid. This is a well-resourced fund that aims to deliver a greater income than the FTSE All-Share Index over any three year period. The fund, which uses a combination of value and growth holdings to meet its yield objective, benefits from a well-structured and highly experienced team.

CT UK Equity Income

Jeremy Smith, this fund’s manager, will scour the London Stock Exchange in search of unloved companies that best suit his contrarian value bias. We like this fund’s patient, high-conviction approach as it’s one that’s proved to be extremely consistent over many years. Its aim is to provide income and the prospects of long term investment growth. This means providing an income yield higher than the FTSE All-Share Index over rolling three year periods. 

*Source: ComputerShare, UK Dividend Monitor, Q1 2024
**Source: Janus Henderson Global Dividend Index, May 2024

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and fund managers and do not constitute financial advice.