US leads dividend growth figures as UK lags

Income-hungry equity investors may be better off searching for returns overseas after a new study found regions such as the US and emerging markets are far outstripping the UK when it comes to dividend growth.

The latest Henderson Global Dividend index found that underlying dividend growth, with one-off events stripped out, in the third quarter of 2014 for companies in the US was 10.8 per cent higher than the same period in 2013.

Underlying emerging market dividend growth was 11 per cent more than the third quarter of 2013, a much better showing than in recent quarters, according to Henderson.

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In contrast, when the strength of sterling this year is stripped out of the calculations, dividends paid out by UK-listed companies actually declined on an annualised basis in the third quarter of this year.

The strength of the US led to a record high in terms of third quarter dividend payouts, with $288.1bn returned to shareholders.

The third quarter saw underlying dividend growth of 9.7 per cent compared to the same period last year, though that growth drops to just 3.8 per cent on a headline basis when all one-off events are included.

The US is often overlooked as a source of income due to its long history of firms preferring share buyback schemes as opposed to dividends as a way of returning cash to shareholders.

But the Henderson report found that significant dividend growth was developing “from almost every sector in the US”.

The report highlighted the US financials sector as a particular area of growth, showing that in just the first nine months of the this year the sector has already paid out double what it did in the whole of 2010.