Fears about a global slowdown were put to one side in the first quarter as companies paid out a record $263.3 billion (£206.8 billion), according to fund group Janus Henderson's latest Global Dividend Index report.
Stock markets have enjoyed a strong start to the year but investors continue to fear a further slowdown in global growth as the US and China hike tariffs in their trade dispute.
While growth may be on the wane, income investors were cheering a 7.8% rise in global dividends to $263.3 billion. The index has risen to a record 190.1, which means dividends are now almost twice the level they were a decade ago when the index started at the end of 2009.
Growth in North America was the fastest in the world on an underlying basis, and the region's tradionally large contribution to first quarter global dividends meant that accounted for a large chunk of overall global dividend growth. In the US, dividends hit a record $122.5 billion, up 8.3% on a headline basis. On an underlying basis, adjusting for the impact of exchange rate movements, one-off special dividends and changes in payout timings, they were up 9.6%.
The US has been a sure thing for income investors as US dividend growth has exceeded the global average 70% of the time in the last five years, with companies benefiting from tax boosts and a robust economy. The largest increases came from the banking sector, with JPMorgan (JPM.N) making the greatest contribution, paying almost $700 million more year-on-year.
Despite UK dividends hitting a three months high of £19.7 billion in the first quarter, and on course to rise above the £100 billion mark for the first time this year, according to Link Asset Services, we still lag the global index in payout growth.
The index shows UK underlying growth of 4.4%, below the global average; the UK has grown at just over half the pace of the rest of the world since 2009 due to a reliance on slower growth oil and banking stocks.
Expanding payout ratios and rising profits in Asia Pacific ex-Japan has seen the region become the world’s strongest dividend grower in the last decade, and in the first quarter the total was up 14.7% to $18.1 billion on a headline basis. This record-breaking three months was largely due to one-off in a seasonally quiet quarter, with underlying growth much lower at 3.8%.
In terms of sectors, pharmaceutical stocks were the biggest payers, contributing $1 of every $8 paid globally and distributing a record high of $30.1 billion. Novartis (NOVN.S) alone paid $1 in every $20, with Roche (ROG.S) close behind.
The smaller leisure sector also paid a record level of income thanks to a $500 million special dividend paid by Intercontinental Hotels (IHG) in October.
Ben Lofthouse, manager of the Janus Henderson Global Equity Income fund, said the strong dividend growth this year was a ‘continuation of the robust growth witnessed in 2018, rather than necessarily setting the tone for another above trend year in 2019’.
Although the asset manager expects a record $1.4 trillion to be paid out in global dividends this year, up 4.2% on last year, Lofthouse said corporate earnings expectations had ‘moderated’ as economic momentum slowed.
‘Dividends are a lagging indicator of company health, so a reduction in their rate of increase is a normal consequence of slower earnings growth,’ he said.
‘Nevertheless, we do not yet feel the need to make changes to our dividend forecast for 2019. We have already allowed for a slowdown in growth this year, and would highlight that dividends are far less volatile than earnings.’
Top 20 global dividend payers
|2||BHP Group Limited (BHP.AX)|
|4||Royal Dutch Shell (RDSA)|
|7||Commonwealth Bank of Australia (CBA.AX)|
|9||Exxon Mobil (XOM.N)|
|10||Akzo Nobel (AZKA.AS)|
|% of total||17%|
|12||BHP Group Plc (BHP)|
|13||JPMorgan Chase (JPM.N)|
|17||Johnson & Johnson (JNJ.N)|
|19||First Abu Dhabi Bank (FAB.AD)|
|20||Wells Fargo (WFC.N)|
|Grand total||$71.1 billion|
|% of total||27%|
Source: Janus Henderson