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Global dividend growth accelerates sharply in 1Q

Janus Henderson Investors  |  08 Jun 2017Text size  Decrease  Increase  |  

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An increasingly positive global economic picture for 2017 means Janus Henderson is upgrading its forecast for dividends.

 

Global dividends rose to $218.7 billion in the first quarter, expanding at an underlying rate of 5.4 per cent year-on-year, according to the latest Global Dividend Index from Janus Henderson.

This was the fastest underlying increase since late 2015, and reflected the speedy transmission into company profits of an accelerating global economy.

Dividend growth was strong across most industries, and in every region of the world, except Europe, where too few companies make payments in 1Q to discern a trend.

Although underlying growth was strong, volatile special dividends were sharply lower, after reaching near record levels in 1Q 2016, so on a headline basis, the global total paid in the first quarter was down 0.3 per cent year on year.

Key highlights

• Global dividends surged ahead 5.4 per cent on an underlying basis in 1Q, paying $218.7 billion in the fastest underlying increase since late 2015.

• Dividend growth was strong across most industries, and regions of the world, except Europe.

• Sharply lower one-off special dividends impacted the headline figures, resulting in the global total falling 0.3 per cent on a headline basis.

• World economic growth is picking up, supporting higher company profits and feeding into dividends.

• The slight weakening in the dollar means growth around the world is less heavily disguised by the exchange rate.

• Janus Henderson upgrades dividends for the full year and now expects 3.9 per cent underlying growth and 1.5 per cent headline growth, taking its global forecast to $1.176 trillion.

 

Global dividends ($US)


chart

 

JHGDI - by region


chart

 

Total dividends, annual growth per quarter


chart

Source: Janus Henderson Investors

 

The fall in one-off special dividends was particularly pronounced in the US, where they were $7.0 billion lower year on year, enough to pull the total dividends paid there down 0.7 per cent to $106.9 billion.

But that disguised a rebound in the underlying growth rate in the US to 5.3 per cent, reversing a sharp slowdown that had continued throughout 2016.

The US banking sector, which used to be the richest source of US dividends before the financial crisis, is once again increasing payouts sharply, and catching up with the oil sector that has battled lower oil prices over the last two years.

Dividend payments in the US are more evenly spread than other parts of the world, so US companies contributed a disproportionately large share of global equity income in the first quarter.

1Q last year also saw very large special dividends in Hong Kong, Singapore, and Australia. These were much smaller this year, and pushed Asia Pacific ex Japan dividends down 2.8 per cent year on year in headline terms.

Stripping out specials and other minor factors, payouts rose an impressive 14.6 per cent on an underlying basis, with particular strength in Australia, where every company in the Janus Henderson index held or raised its payout.

1Q is seasonally relatively small in Australia, but the figures were strong. The Australian total was 30.6 per cent higher year on year on an underlying basis, pushed up by BHP Billiton's (ASX: BHP) return to form.

There were also notable increases from Sydney Airport (ASX: SYD), and Woodside Petroleum (ASX: WPL), the latter returning to growth after a series of cuts over the last two years. The headline growth rate in Australia was pushed higher still by the addition of AGL Energy (ASX: AGL) and Goodman Group (ASX: GMG) to the index, and by a slightly stronger Australian dollar.

In Hong Kong, beyond the volatility of special dividends, regular dividends rose 2.9 per cent, while Singapore saw 20.0 per cent growth on an underlying basis, thanks in particular to semiconductor maker Broadcom, which doubled its payout year on year.

UK dividends fell 5.3 per cent year on year in headline US dollar terms, dragged down by the weak pound. Adjusting for sterling's devaluation and other factors, underlying growth was 7.1 per cent, however.

Half of this increase was thanks to an unexpectedly strong increase from mining group BHP Billiton, which is now profiting from firmer commodity prices, after slashing its dividend in 2016.

In emerging markets, despite rising commodity prices and signs of stabilisation in emerging economies, dividend growth was patchy, and depended largely on Russia where dividend payments are rather irregular and unpredictable.

They fell in India, Brazil, and South Africa on an underlying basis. Almost no Chinese companies make payments in 1Q.

The increasingly positive global economic picture for 2017 means Janus Henderson is upgrading its forecast for dividends. On an underlying basis, the global equity income team now expects growth of 3.9 per cent for the year (up from 3.2 per cent in January), with headline growth of 1.5 per cent (up from 0.3 per cent).

The greater improvement in the headline figure reflects a modest reversal of the strength of the US dollar this year. The upgrade takes the global forecast up $18 billion to $1.176 trillion.

Alex Crooke, head of global equity income at Janus Henderson, said: "2017 has started on a really encouraging note for income investors, at least if you look beyond one-off special dividends. Growth was broadly based across many sectors and countries too."

"The outlook for the world economy looks better at present than at any time in the last few years. That means companies can grow profits and dividends at a faster pace.

"At the moment, the uptick is taking place more quickly than we anticipated, and is stronger too, so we are slightly revising up our forecast for the year, despite the big drop in special dividends in 1Q.

"What's more, the slightly weaker dollar means encouraging underlying dividend growth around the world is not being so heavily disguised by exchange rate effects when dividends are converted back into US dollars."

 

Annual dividends by region in $US billions

table

(click image to enlarge)

Source: Janus Henderson Investors

 

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