Global dividends reached a new record in 2014, but a surging US dollar clouds the horizon

16/02/2015

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​Global dividends soared 10.5% to $1.167 trillion in 2014, a new record, according to the latest Global Dividend Index from Henderson Global Investors.

Underlying growth, was still robust at 8.8%, even with generous special dividends, exchange rate movements and other factors stripped out. The level of the HGDI reached 159.9 at the end of 2014, meaning that dividends have grown almost 60% in just five years.

Key highlights

  • Global dividends reached $1.167 trillion in 2014, a new record
  • The Henderson Global Dividend Index reached 159.9, meaning dividends have grown nearly 60% since 2009
  • The US remains the main driver of world dividend growth, adding more than the annual contribution from Japan
  • However a weak Q4 saw dividends fall 1% headline due to a surging US dollar
  • 2015 dividends now estimated at $1.176 trillion– a reduced forecast owing to US dollar and lower oil pricing

Image_HGDI-5-charts

Source: Henderson Global Investors as at 31 December 2014

Growth slowed sharply at the end of the year, however, as the US dollar surged against every global currency except the Swiss franc. The rise in the dollar was enough to knock $10.9bn off Q4 dividends as a result of the value of income paid around the world translating at a lower exchange rate.  This meant the 2014 total payout was just shy of Henderson’s forecast for the year.

The United States was the main engine of global dividend growth over 2014, adding an impressive $52bn to its 2013 contribution (+17% headline, +15.6% underlying). This increase is more than the entire annual contribution from Japan. Only the US mining sector saw dividends decline, where every company in the HGDI cut its payout. All other sectors saw increases, as rapid growth in the US economy fed through to company earnings.

Emerging markets saw a headline decline of 11.7%, though after adjusting for currency and other factors, underlying growth was 8.5% year on year. On a headline basis, only China saw growth among the BRICS countries, accounting for the majority of emerging markets dividends as economic difficulties beset both Russia and Brazil in particular. Asia Pacific grew 2.9% headline (4.9% underlying) with strong underlying growth in Australia wiped out by a falling Australian dollar.  In Hong Kong investors enjoyed bumper special dividends.

Europe had an excellent year, up 12.3% headline (6.0% underlying), with strong performances from Spain, Switzerland, the Netherlands and France and despite disappointing dividend growth from Germany and Italy.

Japanese companies distributed 5.9% more to their shareholders on a headline basis, despite a falling yen, with underlying growth a solid 14.8%.

There was a wide divergence in performance at industry level. Technology and consumer stocks were strong, while utilities and mining firms did badly. Lower commodity prices meant the mining sector cut payouts for the third year running.

With the oil price in steep decline in the fourth quarter, oil dividends are worth special attention. They rose 5.8% in 2014 to $134.1bn, making them the second largest contributor at an industry level, but further growth will be harder to achieve in 2015.

Alex Crooke, Head of Global Equity Income at Henderson Global Investors said:

"2014 was a superb year for income investors, with developed markets leading the charge. After such a strong performance in 2014, we now expect a pause for breath in 2015. Since we introduced our 2015 forecast, three key things have changed: first, the global economic outlook has clouded; secondly, the oil price has collapsed to a six year low and thirdly, the US dollar has surged in value.

"We don’t expect developed market oil companies to reduce their dividends in 2015, but there is a strong likelihood that Emerging Market producers will pay out markedly less this year as their profitability comes under pressure.

"Overall, we now expect dividends to grow just 0.8% this year on a headline basis, to $1.176 trillion.

"Exchange rate movements are a distraction from companies’ ability to deliver growing dividends to their shareholders over the longer term. Our research shows their effect is negligible over the long-term, accounting for just 0.3% of the world’s 60% growth in dividends since 2009. Of course, in any one year, currency swings can make a big difference. So, while US dollar based investors will see somewhat less growth this year than in 2014, we expect UK investors in global equities to enjoy headline dividend growth of 6.6%, while European investors can look forward to growth of 8.8% based on current exchange rates - in each case much better than the dividend growth their own domestic markets are likely to show, demonstrating the value that a global approach to income investing offers."

Annual dividends by region in USD billions

Region US$ bn20092010% change2011% change2012% change2013% change2014% changeQ413Q414% change
Emerging Markets$60.7$82.235.3%$106.930.1%$116.18.6%$129.111.2%$114.0-11.7%$23.4$12.4-47.0%
Europe Ex Uk$186.6$177.8-4.7%$222.625.2%$196.1-11.9%$204.34.2%$229.412.3%$22.0$21.8-0.9%
Japan$36.1$40.412.0%$49.522.3%$51.33.8%$46.4-9.6%$49.15.9%$20.3$19.8-2.7%
North America$227.0$225.3-0.7%$264.817.5%$337.927.6%$342.01.2%$392.214.7%$89.3$101.013.0%
Asia Pacific$62.9$87.639.2%$107.622.8%$106.0-1.4%$112.35.9%$115.62.9%$23.2$21.3-8.1%
UK$74.1$77.14.0%$88.414.8%$101.915.2%$103.11.2%$135.231.1%$18.7$18.70.1%
TOTAL$647.5$690.46.6%$839.821.6%$909.48.3%$937.23.1%$1,035.510.5%$196.9$194.9-1.0%
Divs outside top 1200$82.2$87.76.6%$106.621.6%$115.58.3%$119.03.1%$131.510.5%$25.0$24.7-1.0%
GRAND TOTAL$730$778.06.6%$946.421.6%$1,024.88.3%$1,056.23.1%$1,167.010.5%$221.9$219.6-1.0%

Source: Henderson Global Investors as at 31 December 2014

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 unfavorable political or legal developments.

Unless otherwise stated all data is sourced by Henderson Global Investors as at 31 December 2014

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Notes to the editors:

Methodology

Each year Henderson analyses dividends paid by the 1,200 largest firms by market capitalisation (as at 31/12 before the start of each year). Dividends are included in the model on the date they are paid. Dividends are calculated gross, using the share count prevailing on the pay-date (this is an approximation because companies in practice fix the exchange rate a little before the pay date), and converted to USD using the prevailing exchange rate. Where a scrip dividend is offered, investors are assumed to opt 100% for cash. This will slightly overstate the cash paid out, but we believe this is the most proactive approach to treat scrip dividends. In most markets it makes no material difference, though in some, particularly European markets, the effect is greater. Spain is a particular case in point. The model takes no account of free floats since it is aiming to capture the dividend paying capacity of the world’s largest listed companies, without regard for their shareholder base. We have estimated dividends for stocks outside the top 1,200 using the average value of these payments compared to the large cap dividends over the five year period (sourced from quoted yield data). This means they are estimated at a fixed proportion of 12.7% of total global dividends from the top 1,200, and therefore in our model grow at the same rate. This means we do not need to make unsubstantiated assumptions about the rate of growth of these smaller company dividends. All raw data was provided by Exchange Data International with analysis conducted by Henderson Global Investors.

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Henderson Press Office: 020 7818 4222 / pressoffice@henderson.com

About Henderson Global Investors

Henderson Global Investors, wholly-owned by Henderson Group plc, is a global asset manager with a strong reputation dating back to 1934. Henderson manages £79.9 billion (pro forma figure as at 01 October 2014) of assets on behalf of clients in the UK, Europe, Asia-Pacific and North America and employs approximately 900 staff members worldwide. Clients include individuals, private banks, third-party distributors, insurance companies, pension funds, government bodies and corporate entities. As a pure investment manager Henderson offers investments across equities, fixed income and multi-assets as well as alternative products, such as private equity, property and hedge funds.

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