Which Countries Pay the Best Dividends?

Income-seeking investors should be thinking globally, and protecting their returns from income tax by investing within a wrapper such as an ISA

Holly Cook 10 April, 2014 | 11:16AM
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UK-listed companies have a fairly strong reputation for paying dividends to their shareholders, but for a greater slice of the pie income-seeking investors should be thinking globally.

Companies listed in the UK contribute 11% of the total global dividend pay-outs, according to a report from Henderson Global Investors, while North American companies contribute the lion’s share – 37%. Our American cousins have long been known for their relative generosity when it comes to rewarding shareholders, but European companies also contribute more to the global total than British firms, with Europe ex-UK contributing 22%, while companies primarily listed in the Emerging Markets contribute 14%. In line with the UK, Asia-Pacific companies contribute 11% and Japanese just 5%.

The total amount paid out by companies around the world has growth substantially over the past five years, hitting a record $1.03 trillion in 2013, up 45% compared to 2009. The increase in pay-outs mirrors the broader improvement in global stock market performances over this period, with healthier earnings leading to wealthier dividend recipients.

Though they may still only account for 14% of the total, the greatest increase in the past five years has come from emerging markets companies, where pay-outs have more than doubled since 2009. Most of this impressive growth took place between 2009 and 2011 and has since stalled as emerging markets, though they still make up $1 in every $7 paid out globally, according to the report. Of course emerging markets are not a homogenous group; the BRIC countries (Brazil, Russia, India and China) account for over half of the emerging market dividends, and dividend growth has happened notably faster than at other emerging markets’ firms.

Asia-Pacific companies have also done a strong job of returning capital to shareholders, with dividends up 79% over the past five years. The underperformers have been our European cousins, who saw dividends increase by just 8% to $200 billion since 2009. As one would expect, the Henderson report confirms that those countries hit worst by the euro crisis are returning less to shareholders. Scandinavian countries, in contrast, have seen something of a dividend boom.

Closer to home, UK pay-outs have grown in line with the global average and the UK’s 11% share of total global dividends is disproportionately large compared to the size of our economy. A comforting tale for local investors seeking income in our low interest rate environment. As in the rest of the world, financials, oil companies and telcos dominate the list of top dividend payers.

Importantly for investors, the outlook for 2014 is set for even faster dividend growth globally. For 2014, Henderson expects dividend growth to accelerate after the slower pace of 2013, with developed markets delivering better income growth than developing markets. “A global approach to income investing can bring real diversification benefits, commented Henderson’s head of global equity income, Alex Crooke.

So which funds might help you tap into this expected income growth? Morningstar analysts see only one Global Equity Income fund as deserving their highest qualitative accolade, a Gold rating. Veritas Global Equity Income focuses on generating a high and growing yield without compromising on capital growth. Morningstar analysts point to its management team as a major strength of the fund. 

Five more funds have also earned a high rating from Morningstar analysts. Aberdeen Global World Dividend, BNY Mellon Global Equity Higher Income, DWS Invest Top Dividend, M&G Global Dividend and Newton Global Higher Income all boast a Silver Morningstar Analyst Rating.

Search for more funds that meet your investing needs here.

Looking for capital growth from global companies? Morningstar’s Jackie Beard shares her ISA picks.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
BNY Mellon Global Equity Inc GBP B Inc2.20 GBP-1.32Rating
BNY Mellon Global Income GBP Inc246.34 GBP-1.33Rating
DWS Invest Top Dividend USD LC197.43 USD0.53Rating
M&G Global Dividend GBP A Inc264.63 GBP-1.11Rating
Veritas Global Equity Income A GBP210.26 GBP-0.89Rating

About Author

Holly Cook

Holly Cook  is Manager, Morningstar EMEA Websites