MEDIA RELEASE: Global Dividends soar to record heights
Announcement posted by Honner 21 Aug 2017
GLOBAL DIVIDENDS SOAR TO RECORD HEIGHTS
21 August 2017
Global dividends hit an all-time quarterly record of $447.5bn in Q2, according to the Janus Henderson Global Dividend Index. They increased 5.4% year-on-year on a headline basis, equivalent to an underlying rise of 7.2% once exchange rates, special dividends, and other factors were taken into account. This was the fastest rate of growth since 2015, with new quarterly records in the US, Japan, Switzerland, Netherlands, Belgium, Indonesia, and South Korea.
Key highlights
- Global Q2 dividends hit a new all-time quarterly record as growth accelerated
- Total payouts rose 5.4% to $447.5bn
- Underlying growth was 7.2% the fastest since late 2015, with every region seeing an increase
- The US, Japan, Switzerland, Netherlands, Belgium, Indonesia, and South Korea all posted new quarterly records
- Forecast for 2017 upgraded to $1.208 trillion, up 3.9% year-on-year, equivalent to an underlying increase of 5.5%
Source: Janus Henderson Investors
Europe dominates the second quarter, as most European companies make a single annual payment. Europe made up two-fifths of the global total in Q2. At $149.5bn, distributions were up 5.8% on an underlying basis, marking an acceleration of the expansion achieved a year ago, and reflecting the improving economic conditions across the continent. 86% of European companies raised or held their dividends year-on-year. The largest increases were in smaller countries, but even among the larger ones, there were new records. Swiss dividends jumped 8.6% on an underlying basis to a record USD24.8bn. German dividends achieved a similar increase, while French payouts grew at a slightly slower underlying pace of 6.1%. Spain and Italy meanwhile disappointed, with dividends falling year-on-year.
Q2 is seasonally small in Australia, meaning one or two stocks can affect the overall figures significantly. The headline figures in Australia looked good, up 9.6% at $10.4bn, but this mainly reflected the addition of Fortescue Metals to the index. Underlying growth in Australia was only 1.0%, as an increase from Rio Tinto was offset by a second consecutive cut from Woolworths due to disappointing profits, while neither Commonwealth Bank nor Telstra, which dominate the quarter, increased payouts.
US growth continued to strengthen too, after a sharp slowdown during 2016. US payouts reached a new record of $111.6bn in Q2, up 9.8%, equivalent to underlying growth of 5.9% once Costco’s very large one-off special dividend was taken into account. US banks made the largest contribution to growth followed by software companies, pharmaceuticals and utilities, with no US sectors registering declines.
The good news continued in Japan, where the second quarter is also seasonally crucial. Payouts rose to a new record of $31.6bn, with underlying growth up an impressive 11.8%, although a weaker yen meant headline growth was slower at 4.2%. Nintendo and Mitsubishi Corporation produced the largest annual increases while Japan Airlines was a notable dividend cutter, on the back of falling profits. Overall however, more than three quarters of Japanese companies raised their payouts in yen terms.
In a quiet quarter for Asia, South Korea posted a new payout record, while in emerging markets, Indonesia, Brazil, Russia, and Mexico were among the best performers. Growth varied widely from country to country, but the overall total was up 29.7% year-on-year (27.1% on an underlying basis).
Of the major regions, only the UK bucked the trend, with dividends falling 3.5% on a headline basis to $32.5bn. This was mainly due to a much weaker pound, however, and growth on an underlying basis was also strong at 6.1%.
Dividend growth was also evident across almost all industries and sectors. Financials, in particular banks, accounted for half the global headline increase, but technology, industrials, and basic materials were also strong. Only telecoms saw payouts slightly fall.
The strong second quarter, and a strengthening global economy has led Janus Henderson to upgrade its forecast for 2017 to a record $1.208 trillion, up $50bn since its preliminary forecast in January. This equates to underlying growth of 5.5% year-on-year; 3.9% in headline terms.
Alex Crooke, Head of Global Equity Income at Janus Henderson said: “The global economy is very supportive for company profits and dividends at present, and helped drive record payouts in many countries around the world. The improvement reflects a normalisation in dividend growth, following two years during which it has been rather subdued. The first half of 2017 has been stronger than we expected, and the second half is looking promising too. Moreover, the US dollar has weakened a little further against many currencies since our last report, so it will prove less of a drag on the headline figures in the second half if it maintains its current levels.
“Taking a global approach means a slowdown in any one part of the world has less impact on your overall income level, but investors will be pleased they are enjoying one of those periods when there is synchronised underlying dividend growth across all regions of the world.”
Source: Janus Henderson Investors
Past performance is no guarantee of future results. International investing involves certain risks and increased volatility not associated with investing solely in the UK. These risks included currency fluctuations, economic or financial instability, lack of timely or reliable financial information or unfavourable political or legal developments.
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Notes to the editors:
All figures are in USD$
Methodology
Each year Janus 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, a particularly European market, 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 Janus Henderson Investors.
Press enquiries
Janus Henderson Press Office (Australia)
Rebecca Piercy
T: +61 (2) 8248 3740
E: rebecca@honner.com.au
About Janus Henderson Investors
Janus Henderson is a leading global active asset manager dedicated to helping investors achieve long-term financial goals through a broad range of investment solutions, including equities, quantitative equities, fixed income, multi-asset and alternative asset class strategies.
Janus Henderson has approximately US$344.9 billion in assets under management (as of 30 June 2017), more than 2,000 employees and offices in 27 cities worldwide. Headquartered in London, the company is listed on the New York Stock Exchange (NYSE) and the Australian Securities Exchange (ASX). It has a market capitalisation of approximately US$7 billion.