Global dividends continue to soar, September 2018

Much like global stock markets, global dividend payments continued to climb in the last quarter of the year (April to July).

According to the latest Janus Henderson Global Dividend Index*, payments rose in almost every region of the world and more records were broken in 12 countries, including France, Japan, and the United States, some of the largest contributors to global income. Overall, global dividends have risen by around 80% since 2009.

Europe dominates

The second quarter of each year is dominated by Europe, as two-thirds of the region’s dividends are paid during the period. Underlying growth here was the strongest since the same period of time in 2015.

European companies paid a record $176.5 billion, an increase of 18.7% year-on-year, as higher corporate profits in 2017 flowed into dividends. Underlying growth was 7.5%, once the strength of European currencies was accounted for.

France, Germany, Switzerland, the Netherlands, Belgium, Denmark and Ireland all broke new records. Only a handful of companies cut their payouts, among them Deutsche Bank, EDF and Credit Suisse.

Fidelity Global Dividend, which is on the Chelsea Selection, has Europe as its highest regional weighting. 34.3%** of the fund is invested in companies from the continent.

North America hits new highs

The US saw dividend payouts rise 4.5% to a record $117.1 billion. Underlying growth was 7.8% after lower special dividends and index changes were taken into account, the fastest expansion in two years.

Even though their expansion was a touch slower than average, US dividends have grown more steadily than anywhere else, declining in only four quarters over the past ten years. Only one US company in 50 cut its payout. The largest was General Electric, as it commenced a restructuring programme and attempted to reduce its debts. Canadian dividends again outpaced those in the US.

M&G Global Dividend, a Core Selection pick, has 50.4%** of the fund invested in US companies and a further 8.8%** in Canadian businesses.

Japan: seasonal high

The second quarter of the year also marks a seasonal dividend high point in Japan, so the rapid 14.2% headline growth (12.3% underlying) made a significant impact on the global total. The $35.9 billion marked a record for Japanese payouts, with big names such as NTT DoCoMo (the predominant mobile phone operator in Japan) and Mitsubishi Corporation posting increases near 25%*.

Another Core Selection fund, Artemis Global Income, has Tokai Carbon Co. as it's largest holding. Representing 3.5%*** of the fund, Tokai Carbon is a developed and stockist of graphite material for use in nuclear power.

Asia benefits from special dividends

Elsewhere in Asia, dramatic headline growth was boosted by large special dividends, but underlying growth was impressive too: in Hong Kong it was 13.5% and in Singapore 46.9%. Banking group DBS in Singapore took advantage of higher profits and surplus capital to make a very large increase in its dividend and accounted for half the growth in dividends from the country.

In Hong Kong, China Mobile made the biggest contribution to growth. And in Emerging Markets, China’s Sinopec, the world’s largest oil refiner, almost tripled its dividend thanks to improved refining margins and a better sales mix.

Guinness Global Equity Income, which is on the Chelsea Selection, has 5.9%*** invested in Chinese companies, 3%*** in Taiwan, and 2.9%*** in Australia.

Ben Lofthouse, head of global equity income at Janus Henderson concluded: “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.

“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.”

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 fund manager and Chelsea and do not constitute financial advice.

*Source: Janus Henderson Global Dividend Index, Q2 2018.

**Source: fund fact sheets, as at 31 July 2018

***Source: fund fact sheets, as at 31 August 2018

Published on 11/09/2018