Global dividends rose to $218.7bn in the first quarter, expanding at an underlying rate of 5.4% 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 Q1 to discern a trend. Although underlying growth was strong, volatile special dividends were sharply lower, after reaching near record levels in Q1 2016, so on a headline basis, the global total paid in the first quarter was down 0.3% year-on-year.

Key highlights

  • Global dividends surged ahead 5.4% on a underlying basis in Q1, 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% 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% underlying growth and 1.5% headline growth, taking its global forecast to $1.176 trillion

Source: Henderson Global Investors

The fall in one-off special dividends was particularly pronounced in the US, where they were $7.0bn lower year-on-year, enough to pull the total dividends paid there down 0.7% to $106.9bn. But that disguised a rebound in the underlying growth rate in the US to 5.3%, 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.

Q1 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% year-on-year in headline terms. Stripping out specials and other minor factors, payouts rose an impressive 14.6% on an underlying basis, with particular strength in Australia, where every company in the Janus Henderson index held or raised its payout. The Australian total was 30.6% higher year-on-year, pushed up by BHP Billiton’s return to form. In Hong Kong, beyond the volatility of special dividends, regular dividends rose 2.9%, while Singapore saw 20.0% growth on an underlying basis, thanks in particular to semiconductor maker Broadcom, which doubled its payout year-on-year.

The first quarter is seasonally relatively unimportant in Europe, since most companies there pay just once per year in the second quarter. UK dividends fell 5.3% 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%, 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 Q1.

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% for the year (up from 3.2% in January), with headline growth of 1.5% (up from 0.3%). 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 $18bn 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 Q1. 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.”

Source: Janus Henderson Investors

Past performance is no guarantee of future results. International investing involves certain risks and increased volatility not associated with investing solely in the UK. These risks included currency fluctuations, economic or financial instability, lack of timely or reliable financial information or unfavourable political or legal developments.