Global dividends bounce back in Q3
Global dividend payouts bounced back during a turbulent third quarter, with headline payouts rising 2.3 per cent year on year after three consecutive negative quarters.
According to the latest Henderson Global Dividend Index, dividends climbed to $297bn (£195.1bn), an increase of $6.8bn on the same period in 2014.
During the volatile period, which witnessed the MSCI AC World index nosedive by 9 per cent, the fund manager’s analysis showed underlying growth was “an encouraging 9 per cent”, in line with the first half of the year.
The Henderson Index ended the third quarter at 156.3, down 3.3 per cent from the 161.7 peak in September last year, as fragility across global exchange rates hit headline growth rates internationally.
Developments over the three months were chiefly down to rapid growth in the US, and a significant special $9.8bn payment from food giant Kraft following its merger with Heinz.
But the report said US companies grew their dividends “at an astonishing pace, with almost every sector increasing distributions”.
Overall US headline payouts soared by 23.4 per cent to $107.9bn, setting a new record while underlying growth reached 10 per cent, marking the seventh consecutive quarter of double-digit increases.
But emerging market companies disappointed, with Chinese dividends falling 2.1 per cent year on year.
Payouts from China, the tenth largest dividend payer in the world, have nearly tripled in six years. But it appears for the first time on record that dividends from China are set to fall in 2015, as the slowing economic growth continues to take its toll on profits and payouts.
Notably during the quarter China Construction Bank made its smallest increase in years, while China Citic Bank cancelled its dividend altogether.
Dividend growth in the UK was also disappointing, as miners and commodity firms struggled with the difficult macroeconomic backdrop. In addition, troubled retailer Tesco cancelled its payout, while Shell and HSBC – respectively the world’s largest and sixth largest payers – once again failed to raise their payouts per share. In all, headline payouts fell 1.5 per cent to $34.3bn, however underlying payouts climbed 4.2 per cent.
Commenting on the analysis, Henderson Global Investors head of global equity income Alex Crooke said that while falling currencies have concealed growth from other developed markets, “the underlying picture is encouraging”.
He added: “The big trends in global financial markets are showing up in the world’s dividends. Developed markets are seeing the best growth as their financial sectors heal and consumers become more confident.
“Currency movements tend to even out over the longer term, so investors should not be concerned about the current fluctuations in exchange rates.”
But with emerging economies now enduring a worse-than-anticipated slowdown, Henderson has cut its forecast for 2015 by $10bn and now predicts global dividends hitting $1.15trn this year, a 2 per cent headline fall, though it expects underlying growth of 9.5 per cent. In 2016, it forecasts a marginally higher headline total of $1.18trn.
