Global Dividends Hit New Record

Janus Henderson's Ben Lofthouse forecasts that 2019 will be a fruitful year for income seekers despite stock market volatility

David Brenchley 20 November, 2018 | 12:48PM

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After a trying year for investors, income seekers should feel confident about the outlook for 2019, according to Janus Henderson’s Ben Lofthouse.

Global stock markets have found the going much harder in 2018 so far thanks to worries around global trade and other geo-political developments. Investors have faced two distinct bouts of volatility in February and October leading many to wonder if the bull market is finally running out of steam.

Despite this, global dividend payments continue to break records. Headline dividend payments for the third quarter came in at $354.2 billion, up 5.1% from $337 billion in 2017 and a new record.

Meanwhile, the Janus Henderson Global Dividend Index reached 184.4, another record. On an underlying basis, which strips out currency fluctuations, dividends rose 9.2%.

That was despite headwinds including a US dollar that continues to be strong and a lower level of special dividends. “The third quarter exceeded our expectations,” says Lofthouse, head of global equity income at Janus Henderson.

“But, more importantly,” he adds, “the quality of growth was better than we expected. Our core underlying measure of growth was strong. 2018 may be a volatile and more challenging year for stock markets, but steady profit growth means dividends should continue to make steady progress.”

Record Breaking Dividend Payments

Not only did global dividends break a third-quarter record, individual countries like the US, Canada, Taiwan and India did, too. In North America, those records came despite underlying growth of 7.6% lagging the global average. The total was, though, boosted by a huge special dividend paid by Dr Pepper Snapple.

The UK, meanwhile, saw weak headline growth of just 3%, thanks in the main to a weak currency, lower specials and calendar effects. But underlying growth was strong at 11.1% thanks to mining and banking stocks. BP’s first dividend increase in dollar terms since 2014 helped, too.

The third quarter tends to be quieter for both European and Japanese companies. Still, underlying growth in Europe was in line with the global average with strong showings from Spain and the Netherlands.

Every Japanese company in the index raised its payout in Q3, continuing strong growth in the country and showing the effects of improving corporate governance under Prime Minister Shinzo Abe’s tenure.

In Asia, the picture was mixed. Headline growth declined 8.8% thanks, again, to lower dividends, but also because of lacklustre numbers in Australia – 1.3% underlying growth. Overall, underlying growth on the continent was more encouraging at 6.8%, driven by strong numbers in Hong Kong, Taiwan, Singapore and South Korea.

Chinese companies pay most of the dividends in Q3, so saw the strongest growth at 14.6%, but that reversed three years of declines. Banks, insurers and energy firms led the way.

Janus Henderson’s outlook for total dividends in 2018 is unchanged in headline terms at 8.5% growth to $1.36 trillion, but the underlying figure has been upgraded slightly to 8.1%, from 7.4%.

The company will present its forecast for dividend growth in 2019 after its Q4 report, with corporate earnings growth in 2019 likely to moderate somewhat.

“That is not to say that profits themselves are set to fall, rather that the pace of expansion may now be slower than previously thought,” explains Lofthouse.

“Growing profits and strong cash flow mean that dividends should continue to be well supported and so investors seeking an income from their shares should feel confident about the year ahead.”

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About Author

David Brenchley

David Brenchley  is a Reporter for Morningstar.co.uk