The latest Janus Henderson Global Dividend Index, released today, shows that total dividends jumped 9.3 per cent in headline terms to $1.37 trillion.
On an underlying basis – Janus Henderson’s preferred measure of core growth – this was equivalent to an increase of 8.5 per cent, the best performance since 2015, and above the long-term trend of 5-7 per cent. Almost nine in 10 companies around the world raised their payouts or held them steady.
“In Q4, headline dividend growth was 8.3 per cent, yielding a total $272.9 billion, a record for the fourth quarter,” according to the report.
Underlying growth was 8.0 per cent. The Janus Henderson Global Dividend Index ended the year at a new record 187.3, meaning the world’s companies paid their shareholders $638 billion more in 2018 than 2009, when the index started.
The index shows that 13 countries delivered record payouts, including Japan, the US, Canada, Germany and Russia. Emerging markets, North America and Japan performed strongest, while Europe lagged behind.
“In Asia, Australia was the real weak spot in 2018,” the report said.
“Australian dividends are heavily dependent on banks, with already high payout ratios and slow-growing profits, while the telecom operator Telstra cut its distributions sharply in a bid to preserve cash. Australian dividends rose just 0.9 per cent year-on-year.
“Other countries in the region performed much better, and in South Korea, Samsung entered the global top 20 payers for the first time. Four years ago, it was not even in the top 100.”
In the United States, record dividends of $468.9 billion were 7.8 per cent higher on an underlying basis in 2018, boosted by banks, healthcare and technology companies. Only one in 25 US companies cut its payout. Canada was even stronger, thanks in particular to oil companies and banks, and enjoyed the fastest dividend growth among the large, developed economies. Japan saw the second-fastest growth, thanks to higher company profits and rising payout ratios.
The year ahead
“Despite more challenging equity market conditions, investors can take comfort in the ability of the world’s companies to continue to generate income,” Janus Henderson head of global equity income Ben Lofthouse said.
“Yields in many parts of the world are very attractive, while 8.5 per cent dividend growth is ahead of the long-term trend. This strength reflects a number of factors; several sectors, such as mining, oil and banking, have been normalising their dividend payments after a period of low or no dividends, while some of the biggest tech firms are increasingly adopting a dividend-paying culture.”
Mr Lofthouse noted that the impact of tax cuts in the US clearly helped dividend growth there, too.
“For the year ahead, we expect dividend growth to be more in line with the longer-run trend. Corporate profit expectations have fallen as global economic forecasts have been revised down, although most observers still expect companies to deliver positive earnings growth in 2019. Dividends, in any case, are much less volatile than earnings, so we remain optimistic on the prospects for income investors,” he said.
Janus Henderson forecasts 2019 dividends will be 3.3 per cent higher at 1.414 trillion, equivalent to an underlying growth of 5.1 per cent.
Looking ahead: To read more about some key investment themes for 2019, click here.