Global dividend payouts reach record levels

Figures from the latest Janus Henderson Global Dividend Index show that global dividend payouts rose 12.9% year-on-year during Q2 2018, reaching the record level of $497.4bn. The Index closed the quarter at 182.0, indicating a rise of more than 80% since 2009.

Among the countries in which dividends reached record levels were France, Japan and the US.

Ben Lofthouse, head of global equity income at Janus Henderson, said: “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. Even in out-of-favor regions, such as Europe, dividends continue to increase, driven by ongoing economic and earnings growth.”

Income investors will be cheering record payouts and strong growth, with the potential for more to come

The performance was bolstered by exchange-rate effects, but even taking these into account global dividends increased 9.5%, the fastest rise in three years.

Companies in Europe – excluding the UK – paid out $176.5bn as a result of high corporate profits in 2017, representing a year-on-year increase of 18.7%  (underlying growth was 7.5%, taking into account currency shifts). France, Germany, Switzerland, the Netherlands, Belgium, Denmark and Ireland all broke dividend payout records. Among the few companies to cut their dividend payouts were Deutsche Bank, EDF and Credit Suisse.

In the US, dividend payouts rose 4.5% to $117.1bn. Underlying growth was 7.8% after lower special dividends and index changes were taken into account – the fastest expansion in two years. An average of one company in every 50 cut its payouts, among them GE, which has commenced a restructuring program and is attempting to reduce its debts.

In Japan, where Q2 is traditionally a dividend payout high point, headline growth was 14.2% (12.3% underlying). Large firms such as NTT DoCoMo and Mitsubishi drove the record growth, increasing payouts by almost 25%.

In Hong Kong and Singapore underlying growth was 13.5% and 46.9% respectively. The latter was boosted significantly by banking group DBS, which took advantage of high profits and surplus capital to drastically increase dividend payouts – accounting for half of the country’s dividend growth. In Hong Kong, China Mobile made the biggest contribution to growth.

The impact on global trade of escalating tariff battles with the US could have a negative impact on corporate profitability

Janus Henderson, a global active asset manager, has increased its forecast for 2018 underlying dividend increases, upgrading from 6.0% to 7.4%. The resurgent dollar, however, is offsetting the improvement. Dividends in the second half will be translated at less favourable exchange rates, so Janus Henderson’s forecast of $1.358trn is unchanged, an increase of 8.6% in headline terms year-on-year.

Lofthouse comments: “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. Dividends in any case are less volatile than profits, and we are confident that 2019 will see the global total continue to rise in underlying terms.

“The trajectory of the dollar may affect the headline growth rate next year, but exchange-rate fluctuations have little impact over the longer term.”