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HINT: proof that overseas dividends grew faster than UK

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HINT: proof that overseas dividends grew faster than UK

Diversified income investors have seen overseas dividends rise 110% since 2009 while payouts from UK companies have failed to keep pace, according to Henderson International Income (HINT).

Dividend analysis by the £288 million global equity income investment trust, which is run by Ben Lofthouse, revealed that payouts from companies the outside UK have more than doubled in the past nine years, with Asia leading the pack with growth of 162%.

North American dividends rose 148% in the period, just ahead of Japan with payments up 144%. Emerging markets income levels shot up 90.7% and Europe racked up the lowest level of growth at 47%.

In comparison with most other regions, UK companies offered a lower level of dividend growth at 74.5% since 2009, although last year marked a record total £94 billion dividend payout for shareholders of UK listed companies.

The research said the payouts from UK companies has fallen as a proportion of global dividends as non-UK stocks have witnessed stronger income growth. In 2009, UK companies accounted for more than £1 in every £10 paid in dividends around the world but as of March this year, this had fallen to less than £1 in every £11 paid.

Despite the proportionate fall in UK income, Lofthouse said it ‘would not be appropriate for a typical UK investor looking for income to only consider international shares’.

‘If your living costs are in pounds, it’s important to match them with at least a portion of your investment income,’ he said.

He added that UK companies have traditionally paid out a large share of profits as dividends and have shown ‘very healthy growth over time’.

‘That said, it makes no sense to eschew overseas companies,’ said Lofthouse (pictured). ‘Some rapidly growing countries and sectors are very attractive for UK investors. And a dividend-paying culture is becoming more established in the world, an element of catch-up that is helping propel international income growth faster than the UK.’

The top 1,200 global companies paid £860 billion in dividends last year, and excluding UK companies, the remaining 1,150 paid £786 billion in 2017.

Top 15 international dividend payers 2017

Company Payout Country
China Mobile £12.3bn Hong Kong
Exxon Mobil £10bn US
Apple £9.9bn US
Microsoft £9.5bn US
AT&T £9.3bn US
China Construction Bank £7.6bn China
Verizon Communications £7.4bn US
Johnson & Johnson £6.9bn US
General Electric £6.5bn US
Chevron £6.4bn US
Commonwealth Bank of Australia £6.3bn Australia
Pfizer £6bn US
Wells Fargo £6bn US
JPMorgan Chase £5.6bn US
Novartis £5.5bn Switzerland

Their percentage of total international dividends: 14.6%.

There are a number of reasons for this growth in international dividends, including the maturing of technology companies that now generate ‘much higher revenues and cash than in the past’.

The fact that just 50 companies in the UK made it into the top 1,200 dividend-paying companies in the world highlights the small pool UK-focused income investors are fishing in.

The analysis shows the top 10 UK companies paid just over £1 in every £2 in UK dividends in 2017 but outside the UK, the top 10 companies contributed only £1 in every £9.

Those relying on the UK for their income will also be disproportionately exposed to the oil, gas and energy sectors, which paid out 23% of UK dividends between 2009 and 2017, double the exposure in international markets.

In contrast, UK investors will receive very little from industrials and almost nothing from technology stocks versus 9% from international industrials and 8% from international technology.  

Top 15 UK dividend payers 2017

Company Payout
Royal Dutch Shell (RDSA) £11.7bn
HSBC (HSBA) £7.9bn
BP (BP) £6.1bn
National Grid (NG) £4.7bn
GlaxoSmithKline (GSK) £3.9bn
British American Tobacco (BATS) £3.5bn
Vodafone (VOD) £3.5bn
Astrazeneca (AZN) £2.8bn
Rio Tinto (RIO) £2.5bn
Lloyds (LLOY) £2.3bn
Imperial Brands (IMB) £1.6bn
Diageo (DGE) £1.6bn
Unilever (ULVR) £1.5bn
BT (BT) £1.5bn
Compass Group (CPG) £1.5bn

Their percentage of total UK dividends: 59.9%.

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