US Companies Lead the Way for Dividends in Q3

The pace of dividend growth is slowing as economic gloom starts to bite, JanusHenderson survey shows

James Gard 18 November, 2019 | 9:17AM

US dollars

Despite another record quarter for payouts, global dividend growth is being dragged down by falling corporate profits, according to the latest Janus Henderson Global Dividend Index.

Dividend payouts hit $355 billion in the third quarter, a 2.8% headline rise, or an increase of 5.3% once exchange rates and other factors are taken into account. Janus Henderson predicts that worldwide dividend income will reach $1.43 trillion in 2019 - up 5.4% from a year ago, but slower than the 8.5% growth achieved in 2018.

Global dividends

Jan Shoemake, investment director at Janus Henderson, says: “We have been cautioning investors all year that the rapid dividend growth they have enjoyed in the last couple of years was set to return to more normal levels: a softening global economy is beginning to have an impact on corporate earnings and, in turn, on dividends."

But despite slowing growth, she believes equities will continue to provide a valuable income source for investors, particularly with low interest rates weighing on global bond yields – a topic we have covered in detail in our fixed income week.

US Ahead Again

But the dividend picture is mixed when we look across the globe, with the US – where stock markets have hit new highs recently after a strong earnings season – out in front. But even in the US, there are signs of a flattening out in dividend growth: one in six companies held their dividend in the third quarter, compared with one in 10 in the first three months of the year. AT&T (T), which bought Time Warner in 2018, will be the biggest dividend payer this year with a total payout of nearly $15 billion, putting it ahead of Apple (AAPL), Exxon Mobil (XOM) and Microsoft (MSFT).

UK dividend growth

Japan, Canada and the UK saw third-quarter record dividend payouts, but the UK was supported by special dividends, particularly from the mining sector, where profits have been boosted by the iron ore boom. Our monthly list of the top 20 FTSE dividend payers reveals that blue-chip yields have often been supported by weaker share prices, and a number of high-profile names – including Vodafone (VOD) – have cut their dividends or announced more flexible payout policies. According to Link’s latest UK dividend report, dividends in the third quarter were the lowest in three years. In Europe, dividends are usually at their lowest in the third quarter. 

The energy sector was the strongest sector for dividend payments in the period, while global telecoms firms were notable for a number of dividend cuts, including Vodafone, Australia’s Telstra and China Mobile.

Nearly half of Chinese companies in the Janus Henderson index reduced their payouts. Year-on-year, China dividend payments were up by 3.7%, although this was flattered by big increases by one or two companies such as PetroChina. “The slowdown in the Chinese economy is affecting the dividend-paying capacity of its companies,” says Shoemake. 

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.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Apple Inc275.15 USD1.36
AT&T Inc38.26 USD-0.23
Exxon Mobil Corp69.23 USD-1.58
Microsoft Corp154.53 USD0.84
Royal Dutch Shell PLC B2,135.50 GBX-1.41
Vodafone Group PLC146.24 GBX1.32

About Author

James Gard  is content editor for Morningstar.co.uk

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