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Dividend bonanza to continue with 8% global growth

Dividend bonanza to continue with 8% global growth

Dividend payouts hit a new record in 2017 and look set to continue with investment group Janus Henderson predicting nearly 8% income growth this year.

Last year saw global dividends reach a new high of $1.251 trillion (£890 billion)  as every region in the world and almost all industries increased the size of their distributions.

Janus Henderson’s global dividend report estimated that headline dividend growth will match the 7.7% increase seen in 2017 and push income pay-outs to $1.348 trillion this year.

Part of the rise will be fuelled by US tax cuts that will not just be reflected in boosted company profits but the repatriation of trillions of dollars of cash that has been earned abroad and taxed there at lower rates.

‘It’s still unclear what companies will do with that cash,’ said the report, which analyses the income paid from the world’s 1200 largest companies.

‘If it’s used for productive investment, it should boost future profits, and so eventually feed into future dividends, but some of it might find its way more directly to shareholders by way of more share buybacks and larger immediate payouts.’

Ben Lofthouse, director of global equity income at Janus Henderson, said 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,’ he said.

Although equity markets have been volatile recently, Lofthouse said the strong dividend payments are reflective of ‘corporate health and economic conditions’ and he expects them to stay ‘stable’.

Corporate confidence and synchronised global growth were the main drivers of dividend increases last year as the US, UK, European Union, and China all expanded at the same time.

‘As a result, companies are seeing rising profits, and healthy cashflows, and that’s enabling them to fund generous dividends,’ said Lofthouse.

Underlying dividend growth, which adjusts for movements in exchange rates, one-off dividends and other factors, came in at 6.8%.  

The US, which is the key driver of income, saw a pick-up in dividend growth but its performance was still slightly below the world average at 5.9% on a headline basis.

Asia Pacific excluding Japan recorded a record year for pay-outs as the total jumped 18.8% to $139.9 billion due to ‘exceptionally large special dividends in Hong Kong’, the largest of which came from China Mobile.

Japanese companies also paid out record dividends, which increased 11.8% on an underlying basis after accounting for the weak yen, with every sector and most companies increasing income.

Emerging market dividends grew ‘strongly’ but the report said they remain way below their 2013 peak. Russia saw ‘dramatic growth’ at 35.7% on an underlying basis but the payments are ‘volatile’.

China, which recorded lower payouts for two years in a row, avoided a third year of disappointment largely due to PetroChina, which paid a special dividend in the fourth quarter on the back of rising oil prices.

One region that lagged was Europe, which saw underlying growth of just 2.7% after a weak fourth quarter that saw ‘cuts from a handful of large companies in France and Spain’. Euro weakness in the ‘crucial’ second quarter when European dividends are paid contributed to the region’s relatively poor figures.

UK companies still managed underlying dividend growth of 10% despite a weak pound as ‘UK-listed multinational mining companies rapidly restored dividends that had been cut or cancelled in the lean years for commodity prices’.

Drilling down, every industry saw higher underlying dividends last year bar telecoms, where they were flat.

The mining industry saw the fastest growth at 27.2% on an underlying basis as companies cut cost aggressively when commodity prices fell meaning ‘profits have bounced back dramatically as prices have recovered’, said the report.

World’s top 10 dividend payers in 2017

Rank Company
1 Royal Dutch Shell
2 China Mobile
3 Exxon Mobil
4 Apple
5 Microsoft
6 AT&T
8 China Construction Bank
9 Verizon Communications
10 Johnson & Johnson
Total $120.5bn
% of total 9.60%

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